Exhibit 2.5
AGREEMENT AND PLAN OF MERGER
by and among
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
(a Delaware corporation),
CPI ACQUISITION COMPANY, INC.
(a Delaware corporation) AND
CAMPUS PIPELINE, INC.
(a Delaware corporation)
SEPTEMBER 30, 2002
TABLE OF CONTENTS
Page
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1. Definitions..............................................................................................2
2. The Merger..............................................................................................11
2.1 The Merger.....................................................................................11
2.2 Merger Consideration...........................................................................11
2.3 Consummation of the Merger.....................................................................12
2.4 Effect of the Merger...........................................................................12
2.5 Certificate of Incorporation, Bylaws; Directors and Officers...................................13
2.6 Conversion of Securities in the Merger.........................................................13
2.7 Appraisal Rights...............................................................................14
2.8 Surrender and Payment..........................................................................15
2.9 Lost Certificates..............................................................................16
3. Closing.................................................................................................16
3.1 Location; Date.................................................................................16
3.2 Deliveries.....................................................................................16
3.3 Termination....................................................................................17
4. Representations and Warranties of the Company...........................................................19
4.1 Organization and Standing......................................................................19
4.2 Charter Documents..............................................................................19
4.3 Capitalization and Ownership...................................................................20
4.4 Authority and Binding Effect...................................................................20
4.5 Validity of the Transactions...................................................................21
4.6 Restrictions...................................................................................21
4.7 Third-Party Options............................................................................21
4.8 Financial Statements; Books of Account.........................................................21
4.9 Taxes..........................................................................................22
4.10 Undisclosed Liabilities........................................................................23
4.11 Intellectual Property..........................................................................24
4.12 Accounts Receivable............................................................................27
4.13 Intentionally Omitted..........................................................................28
4.14 Title to Assets................................................................................28
4.15 Condition of Assets............................................................................28
4.16 Real Property..................................................................................28
4.17 Contracts......................................................................................28
4.18 Employees/Independent Contractors..............................................................30
4.19 Licenses.......................................................................................30
4.20 Compliance with Law and Court Orders...........................................................31
4.21 Claims.........................................................................................31
4.22 Insurance......................................................................................31
4.23 Labor Matters..................................................................................32
4.24 Employee Benefit Plans.........................................................................32
4.25 Transactions with Affiliates...................................................................35
4.26 Absence of Certain Changes.....................................................................35
4.27 Environmental Matters..........................................................................36
4.28 Additional Information.........................................................................37
4.29 Corporate Records..............................................................................37
4.30 Broker's or Finder's Fee.......................................................................38
4.31 Relationship With Customers....................................................................38
4.32 Product or Service Liability...................................................................38
4.33 Product and Service Warranties.................................................................38
4.34 Company Board of Directors Approval and Recommendation; State Takeover Statutes................38
5. Representations and Warranties of SCT...................................................................39
5.1 Organization and Standing......................................................................39
5.2 Authority and Binding Effect...................................................................39
5.3 Validity of Contemplated Transactions..........................................................39
5.4 Broker's or Finder's Fee.......................................................................40
5.5 Financing......................................................................................40
5.6 Claims.........................................................................................40
5.7 HSR............................................................................................40
6. Pre-Closing Covenants...................................................................................40
6.1 Access.........................................................................................40
6.2 No Solicitation, Etc...........................................................................40
6.3 Operation of the Business......................................................................42
6.4 Update of Schedules............................................................................43
6.5 Telephone Service and Internet Access..........................................................43
6.6 Benefit Plans..................................................................................43
6.7 Consents, Further Assurances...................................................................44
7. Post-Closing Covenants..................................................................................44
7.1 Benefit Plans..................................................................................44
7.2 Indemnification................................................................................44
7.3 Directors' and Officer's Insurance.............................................................45
8. Employee Matters........................................................................................45
9. Conditions Precedent to Obligations of SCT and Acquisition Sub..........................................46
9.1 Required Consents..............................................................................46
9.2 Ancillary Documents............................................................................46
9.3 Representations and Warranties; Performance of Obligations.....................................46
9.4 Company Secretary's Certificate................................................................47
9.5 Company Cash Certificate.......................................................................47
9.6 Material Adverse Changes.......................................................................47
9.7 Legal Matters..................................................................................47
9.8 WSGR Legal Opinion.............................................................................47
9.9 Stockholder Approval...........................................................................48
10. Conditions Precedent to Obligations of Company..........................................................48
10.1 Stockholder Approval...........................................................................48
10.2 Ancillary Documents............................................................................48
10.3 SCT's Representations and Warranties; Performance of Obligations...............................48
10.4 Acquisition Sub's Representations and Warranties; Performance of Obligations...................48
10.5 SCT Secretary's Certificate....................................................................48
10.6 Acquisition Sub Secretary's Certificate........................................................49
11. Indemnification.........................................................................................49
11.1 By the Stockholders............................................................................49
11.2 By SCT, Acquisition Sub and the Surviving Company..............................................50
11.3 Procedure for Claims...........................................................................51
11.4 Claims Period..................................................................................52
11.5 Third Party Claims.............................................................................52
11.6 Escrow as Sole Remedy..........................................................................53
11.7 Survival Period................................................................................53
11.8 No Contribution/Indemnification................................................................53
11.9 Characterization of Indemnification Payments...................................................53
11.10 Limitation on Indemnity........................................................................53
12. Public Announcements....................................................................................54
13. Miscellaneous...........................................................................................54
13.1 Tax Matters....................................................................................54
13.2 Contents of Agreement..........................................................................54
13.3 Amendment, Parties in Interest, Assignment, Etc................................................54
13.4 Interpretation.................................................................................55
13.5 Specific Performance...........................................................................55
13.6 Dispute Resolution.............................................................................55
13.7 Expenses.......................................................................................56
13.8 Notices........................................................................................56
13.9 Governing Law..................................................................................57
13.10 Further Assurances.............................................................................57
13.11 Counterparts...................................................................................57
13.12 Stockholder Representative.....................................................................57
DEFINED TERMS
Accounts Receivable........................................................2
Acquisition Proposal...................................................2, 38
Acquisition Sub.........................................................1, 2
Acquisition Sub Officer's Certificate..................................2, 46
Acquisition Sub Secretary's Certificate................................2, 47
Action.....................................................................2
Affiliates.................................................................2
Agreement...............................................................1, 2
Assets.....................................................................2
Association............................................................2, 53
Business Day...............................................................2
Cap........................................................................2
Cash Threshold.........................................................2, 11
CERCLA.....................................................................2
Certificate of Merger..................................................3, 12
Charter Documents..........................................................3
Claim Notice...............................................................3
Claim Response.............................................................3
Closing................................................................3, 15
Closing Date...........................................................3, 15
Closing Payment........................................................3, 11
Code.......................................................................3
Company.................................................................1, 3
Company Cash Certificate..................................................45
Company Common Stock...................................................3, 18
Company Minute Book.......................................................36
Company Preferred Stock................................................3, 19
Company President and Stockholders' Certificate...........................44
Company President and the Stockholders' Certificate........................3
Company Products...........................................................4
Company Secretary's Certificate........................................4, 44
Confidential Information...................................................4
Contract...................................................................4
Copyrights.................................................................4
Court Order................................................................4
Customer Contracts.........................................................4
Damages....................................................................4
Default....................................................................4
DGCL.......................................................................1
Dissenting Shares......................................................4, 14
Effective Time.........................................................5, 12
Employee..................................................................29
Employees..............................................................5, 29
Employment and Withholding Taxes...........................................5
Environmental Claims...................................................5, 34
Environmental Laws.....................................................5, 35
Environmental Permit...................................................5, 35
ERISA......................................................................5
ERISA Affiliate............................................................5
Escrow Agent...............................................................5
Escrow Agreement...........................................................5
Escrow Amount..............................................................5
Escrow Period..............................................................5
Exchange Act............................................................5, 6
Expiration Date.........................................................4, 6
Financial Statements.......................................................6
GAAP.......................................................................6
Hazardous Material.....................................................6, 35
Indemnified Company Party..............................................6, 48
Indemnified Party..........................................................6
Indemnified SCT Party..................................................6, 47
Indemnitor.................................................................6
Intellectual Property...................................................3, 6
Interim Financial Statements...............................................6
Law........................................................................6
Lease..................................................................7, 26
Leases.................................................................7, 26
Liability..................................................................7
Licenses...................................................................7
Liens......................................................................7
Liquidated Claim Notice....................................................7
Litigation.................................................................7
Management Retention Bonus Amount..........................................7
Material Adverse Change Certificate....................................7, 45
Material Adverse Effect....................................................7
Merger..................................................................1, 7
Merger Consideration......................................................11
Non-Terminating Party......................................................7
Ordinary course............................................................7
ordinary course of business................................................7
Owned Intellectual Property................................................7
Patents....................................................................8
Permitted Liens............................................................8
Person.....................................................................8
Plans..................................................................8, 31
Preferred Stockholders.....................................................8
Prime Rate.................................................................8
Proprietary Rights.........................................................8
Pro-Rata Share.............................................................8
Qualified Plan............................................................31
Qualified Plans...........................................................31
Representative.............................................................9
Required Consents..........................................................9
Response Period............................................................9
SCT.....................................................................1, 9
SCT Officer's Certificate..............................................9, 46
SCT Secretary's Certificate............................................9, 46
Securities Act.............................................................9
Series A Preferred Stock..................................................19
Series B Preferred Stock..................................................19
Severance Amount...........................................................9
Shares.................................................................9, 11
Software...................................................................9
Stockholder................................................................1
Surviving Company.....................................................10, 11
Tax Returns...............................................................10
Taxes.....................................................................10
Termination Notice....................................................10, 17
Transaction Documents.....................................................10
Transactions..............................................................10
Unliquidated Claim........................................................10
Unliquidated Claim Notice.............................................10, 49
WARN..................................................................10, 31
WSGR..................................................................10, 45
WSGR Legal Opinion....................................................10, 45
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated
September 30, 2002, by and among SYSTEMS & COMPUTER TECHNOLOGY CORPORATION, a
corporation organized and existing under the laws of the State of Delaware
("SCT"), CPI ACQUISITION COMPANY, INC., a corporation organized and existing
under the laws of the State of Delaware ("Acquisition Sub") and Campus Pipeline,
Inc., a corporation organized and existing under the laws of the State of
Delaware ("Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the Delaware General Corporation Law (the
"DGCL"), SCT, Acquisition Sub and Company desire to enter into a business
combination transaction pursuant to which Acquisition Sub will merge with and
into Company (the "Merger");
WHEREAS, the Board of Directors of Company (i) has determined
that the Merger is advisable and fair to, and in the best interests of, Company
and its stockholders, (ii) has approved this Agreement, the Merger and the
Transactions (as herein defined) and (iii) has adopted resolutions approving the
Agreement, the Merger and the Transactions in accordance with the DGCL;
WHEREAS, the Board of Directors of SCT (i) has determined that
the Merger is advisable, consistent with, and in furtherance of the long term
business strategy of SCT and fair to, and in the best interests of, SCT and its
stockholders, (ii) has approved this Agreement, the Merger and the Transactions
and (iii) has adopted resolutions approving the Agreement, the Merger and the
Transactions in accordance with the DGCL; and
WHEREAS, the Board of Directors of Acquisition Sub (i) has
determined that the Merger is advisable and fair to, and in the best interests
of, Acquisition Sub and its sole stockholder, (ii) has approved this Agreement,
the Merger and the Transactions (as herein defined) and (iii) has adopted
resolutions approving the Agreement, the Merger and the Transactions in
accordance with the DGCL.
NOW, THEREFORE, in consideration of the foregoing premises,
the respective covenants, agreements, representations and warranties herein
contained, and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound and in order to set forth the terms and conditions of the
Merger and the mode of carrying the same into effect, hereby agree as follows:
1. Definitions.
For convenience, defined terms used in this Agreement are
listed in alphabetical order and defined or referred to below (such terms shall
be equally applicable to both the singular and plural forms of the terms
defined).
"Accounts Receivable" means, as of any specified date, any
trade accounts receivable, notes receivable and other miscellaneous receivables.
"Acquisition Proposal" is defined in Section 6.2.1.
"Acquisition Sub" is defined in the Introduction.
"Acquisition Sub Officer's Certificate" is defined in Section
10.6.
"Acquisition Sub Secretary's Certificate" is defined in
Section 10.6.
"Action" is defined in Section 11.5.
"Action Notice" is defined in Section 11.5.
"Affiliates" has the definition set forth in Rule 405 of the
Securities Act; provided, however, that for purposes of this Agreement, SCT and
its Affiliates, on the one hand, and Company and its Affiliates, on the other
hand, shall not be considered Affiliates of the other party.
"Aggregate Liquidation Preference" is defined in Section 2.6.3
"Agreement" means this Agreement and Plan of Merger, including
all schedules and exhibits hereto.
"Assets" means all of Company's assets, properties, business,
goodwill and rights of every kind and description, real and personal, tangible
and intangible, wherever situated and whether or not reflected on the Financial
Statements or the Interim Financial Statements.
"Association" is defined in Section 13.6.2.
"Balance Sheet Date" means August 31, 2002.
"Business Day" means any calendar day which is not a Saturday,
Sunday or public holiday under the laws of the Commonwealth of Pennsylvania.
"Cap" is defined in Section 11.10(b).
"Cash Threshold" is defined in Section 2.2.1.
"CERCLA" is defined in Section 4.27.
"Certificate" is a stock certificate for Shares.
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"Certificate of Merger" is defined in Section 2.3.
"Charter Documents" means an entity's certificate or articles
of incorporation or formation, by-laws, certificate defining the rights and
preferences of securities, articles of organization, general or limited
partnership agreement, operating agreement, certificate of limited partnership,
joint venture agreement or similar document governing the entity.
"Claim Notice" is defined in Section 11.3.1.
"Claim Response" is defined in Section 11.3.1.
"Closing" is defined in Section 3.1.
"Closing Date" is defined in Section 3.1.
"Closing Material Adverse Affect" is defined in Section 9.3.
"Closing Payment" is defined in Section 2.2.2.
"Code" means the U.S. Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder.
"Company" is defined in the Introduction.
"Company Board of Directors" is the board of directors of the
Company.
"Company Cash Certificate" is defined in Section 9.5.
"Company CEO Certificate" is defined in Section 9.3.
"Company Common Stock" is defined in Section 4.3.1.
"Company Indemnitors" is defined in Section 11.3.1.
"Company Intellectual Property" means any and all Intellectual
Property used in the conduct of the business of Company, and includes, without
limitation, the following: (i) all Software acquired by Company, (ii) all
Software developed by or on behalf of Company (for its own account or for the
account of others), (iii) Company Products, and (iv) all Software used by
Company to provide services to others, including software development,
maintenance, consulting, training and support services.
"Company Minute Book" is defined in Section 4.29.
"Company Options" is defined in Section 4.3.1.
"Company Option Plans" is defined in Section 2.6.6.
"Company Preferred Stock" is defined in Section 4.3.1.
-3-
"Company President and Stockholders Certificate" is defined in
Section 9.3.
"Company Products" means all Software, products and service
offerings currently marketed, distributed, or otherwise furnished, licensed or
made available by Company to others, other than third party products that are
resold by Company without modification.
"Company Secretary's Certificate" is defined in Section 9.4.
"Company Warrant" is defined in Section 4.3.1.
"Confidential Information" means any business, technical or
other information of a party, including without limitation trade secrets,
proprietary information, know how, formulae, patterns, lists, compilations,
devices, methods, techniques or processes, that derives independent economic
value, actual or potential, from not being generally known to the public or to
other Persons who can obtain economic value from disclosure or use of the
information.
"Contract" means any written or oral contract, agreement,
license, lease, instrument or other commitment, that is binding on any Person or
its property under applicable Law.
"Copyrights" means all copyrights, copyright registrations and
applications therefor, and all other rights corresponding thereto throughout the
world.
"Court Order" means any judgment, decree, injunction, order or
ruling of any federal, state, local or foreign court or governmental or
regulatory body or authority that is binding on any Person or its property under
applicable Law.
"Customer Contracts" means all Contracts which provide for the
sale or supply of products and/or the performance of services by Company for its
customers.
"Damages" is defined in Section 11.1.1.
"DGCL" means the Delaware General Corporation Law.
"Deductible Amount" is defined in Section 11.10(a).
"Default" means (i) a breach, default or violation, (ii) the
occurrence of an event that with or without the passage of time or the giving of
notice, or both, would constitute a breach, default or violation or (iii) with
respect to any Contract, the occurrence of an event that with or without the
passage of time or the giving of notice, or both, would give rise to a right of
termination or renegotiation or acceleration of a payment obligation or other
obligation as a result of any such breach, default or violation.
"Disclosure Schedule" is defined in Section 4.
"Dissenting Shares" is defined in Section 2.7.1.
"Distributor Agreements" is defined in Section 4.11.3.
-4-
"Effective Time" is defined in Section 2.3.
"Employee" and "Employees" are defined in Section 4.18.1.
"Employment and Withholding Taxes" means any employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care or other similar Taxes, including any deficiencies in
respect thereof, required to be withheld and/or paid by or on behalf of Company
in connection with amounts paid or owing to any employee, independent
contractor, creditor or other party (including, without limitation, under Code
Section 4999(c)(i), but only in the event that stockholder approval as specified
in Section 8 hereof is not obtained), provided, however, that such term shall
not include the employer's portion of Social Security and Medicare payments due
under the Federal Insurance Contributions Act, any federal unemployment
insurance payments due under the Federal Unemployment Tax Act, or any state
unemployment insurance payments, in each case payable in respect of the
Employment-Related Retention Amount.
"Employment-Related Retention Amount" means an amount equal to
twelve and one-half percent (12.5%) of the difference between (x) the
Preliminary Merger Consideration minus (y) the Stockholder Representative
Payment, a portion of which Employment-Related Retention Amount constitutes the
Severance Amount and the balance of which constitutes the Management Retention
Bonus Amount.
"End Date" is defined in Section 3.3.1.
"Environmental Claims" is defined in Section 4.27.
"Environmental Laws" is defined in Section 4.27.
"Environmental Permit" is defined in Section 4.27.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all regulations and rules issued thereunder, or any
successor law.
"ERISA Affiliate" means any person, that together with
Company, is or was at any time treated as a single employer under Section 414 of
the Code or Section 4001 of ERISA.
"Escrow Agent" means the escrow agent reasonably selected by
SCT prior to the Effective Time and approved by Company prior to the Effective
Time, such consent not to be unreasonably withheld.
"Escrow Agreement" is defined in Section 2.2.3.
"Escrow Amount" is defined in Section 2.2.3.
"Escrow Period" is defined in Section 2.2.3.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
-5-
"Exchange Agent" is defined in Section 2.8.
"Expense Cap" means One Million Two Hundred Fifty Thousand
Dollars ($1,250,000).
"Expiration Date" is defined in Section 11.7.
"Final Merger Consideration" is defined in Section 2.2.1.
"Financial Statements" means the audited financial statements
of Company for the fiscal years ended December 31, 2001, including balance sheet
statements, income statements, statements of shareholders equity and statements
of cashflows of Company for the periods then ended.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Hazardous Material" is defined in Section 4.27.
"Indemnified Company Party" is defined in Section 11.2.
"Indemnified Party" is defined in Section 11.3.1.
"Indemnified Party Representative" is defined in Section 11.5.
"Indemnified SCT Party" is defined in Section 11.1.
"Indemnitor" is defined in Section 11.3.1.
"Indemnitor Party Representative" is defined in Section 11.5.
"Independent Board" is defined in Section 6.2.1.
"Intellectual Property" means any or all of the following: (i)
inventions (whether patentable or not), invention disclosures, improvements,
proprietary and Confidential Information, know how, technology, technical data
and customer lists, and all documentation relating to any of the foregoing; (ii)
all works of authorship; (iii) all domain names, URLs and other names and
locators associated with the Internet; (iv) all rights in trade names, logos,
common law trademarks and service marks; (v) all databases and data; and (vi)
Software.
"Interim Financial Statements" means the financial statements
for the eight months ended August 31, 2002, including balance sheet statement,
income statement, statement of shareholders equity and statement of cashflows of
Company for such period.
"Law" means any statute, law, ordinance, code, regulation,
order or rule of any federal, state, local or, foreign governmental or
regulatory body or authority, including those covering environmental, energy,
safety, health, information technology, tax, transportation, bribery,
recordkeeping, zoning, antidiscrimination, antitrust, wage and hour, and price
and wage control matters.
-6-
"Lease" and "Leases" are defined in Section 4.16.
"Liability" means any liability, indebtedness, obligation,
expense, claim, loss, damage, deficiency, guaranty or endorsement of or by any
Person, absolute or contingent, accrued or unaccrued, due or to become due,
liquidated or unliquidated.
"Licenses" means any permits, licenses, franchises,
registrations, certificates, variances, exemptions, consents, approvals and
other authorizations granted by any governmental or regulatory body or
authority.
"Liens" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Liquidated Claim Notice" is defined in Section 11.3.1.
"Litigation" means any lawsuit, action, arbitration,
administrative or other proceeding, criminal prosecution or governmental
investigation or inquiry.
"Management Retention Bonus Amount" is defined in Section 8.
"Material Adverse Change Certificate" is defined in Section
9.6.
"Material Adverse Effect" means any change, event or effect
that is materially adverse to the business operations, assets, liabilities,
condition (financial or otherwise), results of operation and the prospects of
the Company taken as a whole; provided, however, that changes, events or effects
resulting from (A) the performance by the Company of its obligations under this
Agreement, or (B) any other action required or contemplated by this Agreement or
(C) the announcement or pendency of the transactions contemplated by this
Agreement, shall not be deemed by itself or themselves, to constitute a Material
Adverse Effect or taken into account in determining whether a Material Adverse
Effect has occurred.
"Merger" is defined in the Introduction.
"Merger Consideration" is defined in Section 2.2.
"Non-Terminating Party" is defined in Section 3.3.3.
"Notifying Party" is defined in Section 11.3.1.
"Ordinary course" or "ordinary course of business" means the
ordinary course of business that is consistent with past practices.
"Owned Intellectual Property" means all Intellectual Property
for which Proprietary Rights therein are wholly, partially or jointly owned by
Company.
-7-
"Patents" means all United States, international and foreign
patents and applications therefor and all reissues, divisions, renewals,
extensions, provisional applications, continuations and continuations-in-part
thereof.
"Permitted Liens" means (i) liens for Taxes, assessments or
similar charges to the extent not yet due and payable; (ii) liens of mechanics,
materialmen, warehousemen, carriers, or other like liens securing obligations
incurred in the ordinary course of the business; (iii) easements, rights of way,
claims, objections, defects, reservations, consents, tenancies, licenses and the
like affecting any real property, in each case of record, visible upon a
physical inspection of the real property or otherwise made known to SCT and (iv)
liens, encumbrances, restrictions, and adverse claims of any nature whatsoever
which are not material in amount and which do not adversely affect Company's use
of the property subject thereto.
"Person" means any natural person, corporation, partnership,
proprietorship, association, joint venture, trust or other legal entity.
"Plans" is defined in Section 4.24.1.
"Preferred Stockholders" means the Stockholders owning Company
Preferred Stock.
"Preliminary Merger Consideration" is defined in Section
2.2.1.
"Prime Rate" means the prime lending rate as reported in The
Wall Street Journal from time to time as the base rate on corporate loans.
"Proprietary Rights" means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all Patents; (ii) all
rights in inventions (whether patentable or not), invention disclosures,
improvements, proprietary and Confidential Information, know how, technology,
technical data and customer lists, and all documentation relating to any of the
foregoing; (iii) all Copyrights; (iv) all rights in domain names, URLs and other
names and locators associated with the Internet; (v) all rights in industrial
designs and any registrations and applications therefor throughout the world;
(vi) all rights in trade names, logos, common law trademarks and service marks,
trademark and service ▇▇▇▇ registrations and applications therefor throughout
the world; (viii) all rights in databases and data; (ix) all moral and economic
rights of authors and inventors, however denominated, throughout the world; (x)
all rights in Software; (xi) all modifications and improvements to and
derivatives of any of the foregoing; and (xii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
"Pro-Rata Share" means, with respect to each Stockholder, the
quotient of (a) the sum of (i) the product of the Series A Preference Per Share
multiplied by the number of shares of Company Series A Preferred Stock owned by
such Stockholder as of immediately prior to the Effective Time and (ii) the
product of the Series B Preference Per Share multiplied by the number of shares
of Company Series B Preferred Stock owned by such Stockholder as of immediately
prior to the Effective Time, divided by (b) the Aggregate Liquidation Preference
(as defined in Section 2.6.3 hereof).
"Qualified Plan" and "Qualified Plans" are defined in Section
4.24.3.
-8-
"Receiving Party" is defined in Section 11.3.1.
"Registered Owned Proprietary Rights" means any applications,
registrations, or the like claiming or evidencing any Proprietary Rights and
filed in the name of Company, such as patent applications and patents, trademark
applications and registrations, copyright registrations, and domain name
registrations.
"Representative" means, with respect to any Person, any
officer, director, employee, affiliate, agent, representative or advisor,
including any investment banker, attorney, or accountant retained by such Person
or any of its subsidiaries.
"Required Consents" is defined in Section 3.2.1.
"Response Period" is defined in Section 11.3.1.
"SCT" is defined in the Introduction.
"SCT Indemnitors" is defined in Section 11.3.1.
"SCT Officer's Certificate" is defined in Section 10.5.
"SCT Secretary's Certificate" is defined in Section 10.5.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Series A Preference Per Share" means $6.075.
"Series A Preferred Stock" is defined in Section 4.3.1.
"Series B Preference Per Share" means $16.314.
"Series B Preferred Stock" is defined in Section 4.3.1.
"Severance Amount" is defined in Section 8.
"Shares" is defined in Section 2.2.1.
"Software" means any and all computer software and code,
including assemblers, applets, compilers, objects, source code, object code,
electronic data (including image and sound data), design tools and user
interfaces, in any form or format.. Software includes source code listings,
programmer's notes, documentation and any and all other material related to the
Software.
"Stockholder" and "Stockholders" shall mean the holders of
Company's issued and outstanding Common Stock and Preferred Stock immediately
prior to the Effective Time. "Stockholder Representative" is defined in Section
13.12.1.
"Stockholder Representative Payment" means Fifty Thousand
Dollars ($50,000).
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"Superior Proposal" is defined in Section 6.2.1.
"Surviving Company" is defined in Section 2.1.
"Tax Returns" means all reports, forms, declarations, returns,
statements (including estimated reports, forms, declarations, returns or
statements) and other similar documents required to be filed or delivered with
respect to any Taxes.
"Taxes" shall mean (i) all federal, state, local or foreign
taxes, duties, charges, fees, contributions, levies or other assessments imposed
by any governmental agency, authority or body, including but not limited to
income, gross receipts, value-added, excise, withholding, personal property,
real estate, sales, use, ad valorem, license, lease, service, severance, stamp,
transfer, payroll, employment, social security, unemployment, insurance,
disability, workers' compensation, customs, alternative, add-on minimum,
estimated and franchise taxes, and any other taxes, duties, charges, fees,
contributions, levies or other assessments imposed by a governmental agency,
authority or body (including any interest, penalties or additions to tax or
additional amounts attributable to or imposed on or with respect to any of the
foregoing) and (ii) any liability to any other Person (other than a governmental
agency, authority or body) for or in respect of any of the foregoing items,
either by operation of applicable Law or under any agreement or arrangement,
whether or not written, providing for the allocation, sharing or indemnification
of any of the foregoing items.
"Terminating Party" is defined in Section 3.3.3.
"Termination Fee" is defined in Section 3.3.3.
"Termination Notice" is defined in Section 3.3.2.
"Transaction Documents" means this Agreement, the Escrow
Agreement, the Company CEO Certificate, the Cash Certificate, the Material
Adverse Change Certificate, the Company Secretary's Certificate, and the
Certificate of Merger.
"Transaction Expenses" is defined in Section 13.7.
"Transactions" means the Merger and the other transactions
contemplated by the Transaction Documents.
"Unliquidated Claim" is defined in Section 11.3.1.
"Unliquidated Claim Notice" is defined in Section 11.3.1.
"WARN" is defined in Section 4.23.4.
"WSGR Legal Opinion" is defined in Section 9.8.
"WSGR" is defined in Section 9.8
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2. The Merger
2.1 The Merger. Upon and subject to the terms and conditions of this
Agreement and in accordance with the relevant provisions of the DGCL at the
Effective Time, Acquisition Sub shall merge with and into Company, the separate
existence of Acquisition Sub shall thereupon cease, and Company shall continue
as the surviving company of the Merger (the "Surviving Company").
2.2 Merger Consideration.
2.2.1 The aggregate consideration (the "Final Merger
Consideration") payable by SCT and/or Acquisition Sub at the Effective Time for
all of the issued and outstanding shares of capital stock of Company (the
"Shares") shall be based upon the Preliminary Merger Consideration (as defined
below). For purposes of this Agreement, the "Preliminary Merger Consideration"
shall be equal to (i) Forty-Two Million Dollars ($42,000,000.00), (ii) plus an
amount equal to the amount of cash held by Company as of September 30, 2002
(which shall be equal to the amount set forth in the Company Cash Certificate)
in excess of the Cash Threshold (as defined below), or if the amount of cash
held by Company as of September 30, 2002 is less than the Cash Threshold, minus
the amount by which such cash is less than the Cash Threshold, in cash, (iii)
minus the amount by which the aggregate amount of all Transaction Expenses paid
by Company prior to or simultaneous with the Effective Time exceeds the Expense
Cap. The "Cash Threshold" shall be equal to (a) Fifteen Million Dollars
($15,000,000), minus (b) the lesser of (i) the aggregate amount of all
Transaction Expenses paid by Company prior to or simultaneous with the Effective
Time and (ii) the Expense Cap. Following the determination of the Preliminary
Merger Consideration on the Closing Date, the Final Merger Consideration shall
be determined by subtracting from the Preliminary Merger Consideration an amount
equal to the Employment-Related Retention Amount, with such difference
constituting the "Final Merger Consideration."
2.2.2 At the Effective Time, SCT shall deliver the Final
Merger Consideration, minus the Escrow Amount (the "Closing Payment") to the
Exchange Agent (as defined below) via wire transfer of immediately available
funds.
2.2.3 Escrow Amount. An amount equal to (x) Three Million Five
Hundred Thousand Dollars ($3,500,000) plus the Stockholder Representative
Payment shall be deposited into escrow (the "Escrow Amount"), with the Escrow
Agent in accordance with the terms of an Escrow Agreement, the form of which is
attached hereto as Exhibit A (the "Escrow Agreement"), until December 31, 2003
(the "Escrow Period") as security for the indemnification obligations of the
Stockholders set forth in Section 11. The Escrow Amount shall be deposited into
escrow at the Closing by SCT, without any action of the Stockholders. In
accordance with the terms of the Escrow Agreement, within 30 days following the
expiration of the Escrow Period, the Escrow Amount (or, as the case may be, the
balance thereof remaining after satisfying indemnification claims as provided in
the Escrow Agreement) shall, to the extent not subject to claims by SCT, be
delivered to the Stockholders in proportions equal to each Stockholder's
Pro-Rata Share of the Escrow Amount.
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2.3 Consummation of the Merger. Subject to the terms of this Agreement,
on the Closing Date, the parties hereto will cause the Merger to be consummated
by filing a properly executed Certificate of Merger in accordance with Section
251 of the DGCL and other appropriate documents executed in accordance with the
DGCL in order to effect the Merger, with the Department of State of the State of
Delaware (the "Certificate of Merger"). The Merger shall become effective upon
the filing of the Certificate of Merger or at such other time as is agreed by
Company and SCT and specified in the Certificate of Merger (the time at which
the Merger becomes fully effective being the "Effective Time" of the Merger).
2.4 Effect of the Merger. Subject to the terms of this Agreement at the
Effective Time, the Merger shall have the effects set forth in Section 259 of
the DGCL. Without limiting the generality of the foregoing, and subject thereto
and the terms of this Agreement, at the Effective Time, the Surviving Company
shall be a wholly-owned subsidiary of SCT, all the properties, rights,
privileges, powers and franchises of Company and Acquisition Sub, shall vest in
the Surviving Company, and all debts, liabilities and duties of Company and
Acquisition Sub shall become the debts, liabilities and duties of the Surviving
Company.
2.5 Certificate of Incorporation, Bylaws; Directors and Officers. The
certificate of incorporation of the Surviving Company shall be amended in its
entirety to be identical to the certificate of incorporation of Acquisition Sub
as in effect immediately prior to the Effective Time (except that the
certificate of incorporation of the Surviving Company shall continue to provide
that the name of the corporation is Campus Pipeline, Inc.) and such certificate
of incorporation shall continue in full force and effect until thereafter
amended and changed in accordance with the provisions thereof and the DGCL. The
bylaws of the Surviving Company shall be amended in their entirety to be
identical to the bylaws of Acquisition Sub as in effect immediately prior to the
Effective Time (except that the bylaws of the Surviving Company shall continue
to provide that the name of the corporation is Campus Pipeline, Inc.) and such
bylaws shall continue in full force and effect until thereafter amended and
changed in accordance with the provisions thereof, the certificate of
incorporation of the Surviving Company and the DGCL. The directors and officers
of Acquisition Sub immediately prior to the Effective Time shall be the
directors and officers of the Surviving Company at and after the Effective Time,
until their successors are duly elected and qualified in accordance with the
bylaws of the Surviving Company and the DGCL.
2.6 Conversion of Securities in the Merger. At the Effective Time, by
virtue of the Merger, and without any action on the part of SCT, Acquisition
Sub, Company, the Stockholders or any other holders of any of the securities of
any of such entities:
2.6.1 each share of capital stock of Company that is owned by
Company or held in the treasury of Company shall be canceled and retired and no
consideration shall be paid or delivered in exchange therefore;
2.6.2 each share of issued and outstanding Company Common
Stock immediately prior to the Effective Time, other than Shares to be cancelled
in accordance with subsection 2.6.1 and Dissenting Shares (as defined in Section
2.7 hereof), shall automatically be cancelled and retired without any conversion
thereof and shall cease to exist, and each Stockholder owning a certificate
representing any such Share shall cease to have any rights with respect thereto;
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2.6.3 each share of issued and outstanding Company Series A
Preferred Stock immediately prior to the Effective Time, other than Shares to be
cancelled in accordance with subsection 2.6.1 and Dissenting Shares, shall be
converted into the right to receive, in cash, an amount equal to the quotient of
(a) the product of (i) the Final Merger Consideration multiplied by (ii) the
Series A Preference Per Share, divided by (b) the Aggregate Liquidation
Preference; where the "Aggregate Liquidation Preference" means the sum of (i)
the product of the Series A Preference Per Share multiplied by the number of
issued and outstanding shares of Company Series A Preferred Stock as of
immediately prior to the Effective Time and (ii) the product of the Series B
Preference Per Share multiplied by the number of issued and outstanding shares
of Company Series B Preferred Stock as of immediately prior to the Effective
Time. All such converted Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each Stockholder owning a certificate representing any such Share
shall cease to have any rights with respect thereto, except the rights provided
in this subsection 2.6.3;
2.6.4 each share of issued and outstanding Company Series B
Preferred Stock immediately prior to the Effective Time, other than Shares to be
cancelled in accordance with subsection 2.6.1 and Dissenting Shares, shall be
converted into the right to receive, in cash, an amount equal to the quotient of
(a) the product of (i) the Final Merger Consideration multiplied by (ii) the
Series B Preference Per Share, divided by (b) the Aggregate Liquidation
Preference (as defined in subsection 2.6.3). All such converted Shares, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each Stockholder owning a certificate
representing any such Share shall cease to have any rights with respect thereto,
except the rights provided in this subsection 2.6.4.
2.6.5 each share of Acquisition Sub stock issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchangeable for one (1) validly issued, fully paid and non-assessable share of
stock of the Surviving Company.
2.6.6 Company Options. Immediately prior to the Effective
Time, each outstanding option to purchase shares of Company Common Stock under
the Company's Share Option Plan and 1999 Stock Plan (the "Company Option
Plans"), and the Company Option Plans themselves shall terminate and shall not
be assumed by SCT. Company shall take all necessary actions (including providing
all required notices) to ensure that all outstanding Company Options and such
Company Option Plans are terminated immediately prior to the Effective Time.
Company hereby acknowledges that SCT has provided sufficient notice of its
intent to not assume any Company Options.
2.6.7 Company Warrant. At the Effective Time, the Company
Warrant, if it has not been terminated prior to such date, shall be converted
into a warrant to purchase an amount of cash equal to the amount of Merger
Consideration to which the holder of such Company Warrant would have been
entitled had such holder exercised the Company Warrant in full immediately prior
to the Effective Time. Company will use its commercially reasonable efforts to
receive the written consent of Dell USA L.P. to the termination of the Company
Warrant prior to the Effective Time.
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2.7 Appraisal Rights.
2.7.1 Notwithstanding any provision of this Agreement to the
contrary, any shares of capital stock of Company outstanding immediately before
the Effective Time held by a holder who has properly demanded and perfected
appraisal rights for such shares in accordance with Section 262 of the DGCL and
who, as of the Effective Time, has not withdrawn or lost such appraisal rights
("Dissenting Shares"), shall not be converted into or represent the right to
receive the consideration for Shares of Company as provided in Sections 2.2 and
2.6 hereof, and the holder of Dissenting Shares shall be entitled only to such
rights as are provided by the DGCL.
2.7.2 If any holder of Dissenting Shares shall effectively
withdraw or lose (through failure to perfect or otherwise) the right to
appraisal as provided in the DGCL, then as of the later of the Effective Time or
such withdrawal or loss of such appraisal rights, such holder's shares of
capital stock of Company shall automatically be converted into and represent
only the right to receive the consideration for such shares as provided for in,
and subject to the terms and conditions of, Sections 2.2 and 2.6 hereof, without
interest thereon.
2.7.3 Company shall give SCT (i) prompt written notice of any
written demands for appraisal of any of the Shares, attempted withdrawals of
such demands, and any other instruments received by Company relating to the
rights of any holder of the Shares relating to rights of appraisal, and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. Company or Surviving Company may not, except upon
the prior written consent of SCT, voluntarily make any payment with respect to
any demands for appraisal of any of the Shares, offer to settle or settle any
such demands, or approve any withdrawal of such demands.
2.7.4 To the extent that SCT, Acquisition Sub or the Surviving
Company makes any payment or payments in respect of Dissenting Shares, SCT,
Acquisition Sub or the Surviving Company shall be entitled to recover under the
terms of Section 11 hereof the aggregate amount by which such payment or
payments exceed the consideration that otherwise would have been payable in
respect of such Dissenting Shares.
2.8 Surrender and Payment.
2.8.1 Prior to the Effective Time, SCT shall appoint an
independent agent (the "Exchange Agent") for the purpose of exchanging
certificates representing Shares (the "Certificates") for the Final Merger
Consideration. SCT will make available to the Exchange Agent, as needed, the
Final Merger Consideration to be paid in respect of the Shares. Promptly after
the Effective Time, SCT will send, or will cause the Exchange Agent to send, to
each holder of Shares entitled to receive Final Merger Consideration at the
Effective Time a letter of transmittal and instructions (which shall specify
that the delivery shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Certificates to the Exchange Agent) for use in such
exchange.
2.8.2 Each holder of Shares that have been converted into the
right to receive the Final Merger Consideration will be entitled to receive,
upon surrender to the Exchange Agent of a Certificate, together with a properly
completed letter of transmittal, the Final Merger Consideration payable for each
Share represented by such Certificate. All such funds shall be paid to the
holders of Shares by cash, certified or bank check, or by wire transfer. Until
so surrendered, each such Certificate shall represent after the Effective Time
for all purposes only the right to receive such Final Merger Consideration.
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2.8.3 If any portion of the Final Merger Consideration is to
be paid to a Person other than the Person in whose name the surrendered
Certificate is registered, it shall be a condition to such payment that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such payment
to a Person other than the registered holder of such Certificate or establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
2.8.4 After the Effective Time, there shall be no further
registration of transfers of Shares. If, after the Effective Time, Certificates
are presented to the Surviving Corporation, they shall be canceled and exchanged
for the Final Merger Consideration provided for, and in accordance with the
procedures set forth, in this Section 2.
2.8.5 Any portion of the Final Merger Consideration made
available to the Exchange Agent pursuant to Section 2.8.1 to pay for Shares for
which appraisal rights have been perfected shall be returned to SCT, upon
demand.
2.9 Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed together with an
indemnity in usual and customary form, the Exchange Agent will pay, in exchange
for such lost, stolen or destroyed Certificate, the Final Merger Consideration
to be paid in respect of the Shares represented by such Certificate, as
contemplated by this Section 2.
3. Closing.
3.1 Location; Date. The closing for the Transactions (the "Closing")
shall be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, 400 Berwyn Park, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ on the earlier of (i) the 15th day following the
date that Company provides to its option holders notice that SCT will not be
assuming any of such options, and (ii) the date all such option holders waive in
writing the right to receive such 15 day notice, or at such other date and place
as may be mutually agreed by the parties (the "Closing Date").
3.2 Deliveries. At the Closing and as a condition to Closing:
3.2.1 Company shall deliver to SCT:
(a) The Company Minute Book;
(b) All of the consents, waivers and approvals listed
on Schedule 3.2.1(b) (the "Required Consents");
(c) The Company CEO Certificate, duly executed by
Company;
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(d) The Company Secretary's Certificate, duly
executed by Company;
(e) The Material Adverse Change Certificate, duly
executed by Company;
(f) The Company Cash Certificate;
(g) The WSGR Legal Opinion, duly executed by WSGR;
(h) The Escrow Agreement, duly executed by each of
the Stockholder Representative and the Escrow Agent; and
(i) The Certificate of Merger, duly executed by
Company.
3.2.2 SCT and/or Acquisition Sub, as the case may be, shall
deliver to Company:
(a) The cash comprising the Closing Payment;
(b) The SCT Officer's Certificate, duly executed by
SCT;
(c) The Acquisition Sub Officer's Certificate, duly
executed by Acquisition Sub;
(d) The SCT Secretary's Certificate, duly executed by
SCT;
(e) The Acquisition Sub Secretary's Certificate, duly
executed by Acquisition Sub;
(f) The Escrow Agreement, duly executed by SCT; and
(g) The Certificate of Merger, duly executed by
Acquisition Sub.
3.2.3 SCT and/or Acquisition Sub shall deliver to the Escrow
Agent cash comprising the Escrow Amount.
3.3 Termination.
3.3.1 When Agreement May Be Terminated. This Agreement may be
terminated at any time prior to Closing:
(a) by mutual agreement of SCT and Company;
(b) by SCT or Company should the Closing not have
taken place on or before October 31, 2002, or such later date as shall be
mutually agreed to in writing by Company and SCT (the "End Date"); provided,
however, that Company or SCT may terminate this Agreement pursuant to this
subparagraph (b) only if Closing shall not have occurred by such date contained
in this subparagraph (b) for a reason other than a failure by such party to
satisfy the conditions to Closing of the other party set forth in Sections 9 or
10 hereof; or
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(c) by SCT if (i) it is not in material breach of its
obligations under this Agreement, (ii) there has been a breach of any
representation, warranty or covenant of Company contained in this Agreement such
that the conditions set forth in Section 9.3 would not be satisfied by the End
Date, and (iii) the breach referred to in clause (ii) of this sentence shall not
have been cured within ten (10) days after notice thereof has been delivered by
SCT to Company;
(d) by Company if (i) it is not in material breach of
its obligations under this Agreement, (ii) there has been a breach of any
representation, warranty or covenant by SCT or Acquisition Sub contained in this
Agreement such that the conditions set forth in Section 10.3 or 10.4 would not
be satisfied by the End Date, and (iii) the breach referred to in clause (ii) of
this sentence shall not have been cured within ten (10) days after notice
thereof has been delivered by Company to SCT;
(e) by SCT if SCT executes a definitive agreement to
sell or transfer more than fifty percent (50%) of its (i) issued and outstanding
voting securities, or (ii) assets (determined with reference to the value of
such assets); or
(f) by either SCT or Company if, after the lapse of
the five Business Day period contemplated by Section 6.2.3, the Independent
Board determines to accept or recommend to the Company Stockholders any Superior
Proposal
3.3.2 Method of Termination. The party entitled to terminate
this Agreement pursuant to Section 3.3.1 shall deliver written notice (the
"Termination Notice"), in a method permitted pursuant to Section 13.1.4, of its
intention to terminate this Agreement, indicating which condition listed in
Section 3.3.1 has been satisfied.
3.3.3 Effect of Termination. In the event of termination of
this Agreement pursuant to paragraphs (a) through (d) of Section 3.3.1, by
either Company or SCT, as provided above, this Agreement shall forthwith
terminate and there shall be no liability on the part of either Company and the
Stockholders or SCT and Acquisition Sub or their respective officers or
directors; except that in the event this Agreement shall be terminated pursuant
to either subsection 3.3.1(c) or 3.3.1(d) hereof as a result of a breach of this
Agreement by a party hereto, the terminating party shall have the right to
pursue its remedies set forth in Section 11 with respect to such breach or
breaches giving rise to such termination. Notwithstanding Section 3.3.1, if (x)
SCT or Company terminates this Agreement in violation of such Section, (y) SCT
terminates this Agreement pursuant to Section 3.3.1(e) or (z) SCT or Company
terminates this Agreement pursuant to Section 3.3.1(f) (the party terminating
this Agreement, in the case of clauses (x) and (z), or SCT, in the case of
clause (y), is referred to as the "Terminating Party"), the other party (the
other party, in the case of clauses (x) and (z), or Company, in the case of
clause (y), is referred to as the "Non-Terminating Party") shall be entitled to
receive a break-up fee in an amount equal to One Million Two Hundred Thousand
Dollars ($1,200,000) (the "Termination Fee") from the Terminating Party within
ten (10) days following the date of delivery of the Termination Notice. The
parties acknowledge and agree that it is difficult or impossible to determine
with precision the amount of damages that would or might be incurred by the
Non-Terminating Party if such a termination were to occur. It is understood and
agreed by the parties that if the Non-Terminating Party shall be damaged by such
a termination, (i) it would be impracticable or extremely difficult to fix the
actual damages resulting therefrom, (ii) the Termination Fee is in the nature of
liquidated damages, and not a penalty, and is fair and reasonable, and (iii) the
Termination Fee represents a reasonable estimate of fair compensation for the
losses that may reasonably be anticipated from such a termination, and shall be
the sole and exclusive measure of damages with respect to any such termination.
Once such liquidated damages have been paid in accordance with the provisions of
this Agreement, the Terminating Party shall be relieved of any further liability
in respect of damages relating to the fact or circumstance giving rise to such
liquidated damages.
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4. Representations and Warranties of the Company. Except as disclosed in the
disclosure schedule attached hereto, (the "Disclosure Schedule"), which
disclosure shall provide an exception to or otherwise qualify the
representations and warranties of Company specifically referenced in such
disclosure, and such other representations and warranties of Company set forth
herein where the applicability of such disclosure would reasonably be apparent,
Company represents and warrants to SCT as follows (provided that the parties
hereby acknowledge that (a) each representation and warranty set forth in this
Section 4, to the extent that such representation or warranty applies to the
"Stockholders" or "Affiliates" of Company, shall expressly exclude SCT and all
of SCT's Affiliates and (b) Company shall not be required to disclose on any
schedule in the Disclosure Schedule any Contract, transaction or other
arrangement with SCT or any of SCT's Affiliates or to which SCT or any of SCT's
Affiliates is a party, and failure to disclose any such Contract, transaction or
arrangement shall not be deemed to be a breach hereof; and further provided,
that Company shall not be considered an Affiliate of SCT):
4.1 Organization and Standing. Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware having all necessary corporate power and authority to carry on its
business as it has been and is now being conducted and to own, lease and operate
the Assets. As of the date of this Agreement, Company has employees resident in
the states set forth on Schedule 4.1. Company is duly qualified to do business
and is in good standing in every jurisdiction in which the Company's business or
the character of the Assets requires such qualification, except where the
failure to be duly qualified and in good standing have not had, does not have,
or would not reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect. Company does not have any subsidiaries or any stock or
other equity or ownership interest (whether controlling or not) in any
corporation, association, partnership, joint venture, trust or other legal
entity.
4.2 Charter Documents. Company has heretofore furnished to SCT a
complete and correct copy of its Charter Documents, each as amended to date. The
Charter Documents are in full force and effect and Company is not is in
violation of any provision of the Charter Documents.
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4.3 Capitalization and Ownership.
4.3.1 Company's capital stock consists of (a) 65,200,000
shares of common stock, $0.001 par value per share, of which only 21,678,498
shares are currently issued and outstanding (the "Company Common Stock") and (b)
8,109,062 shares of preferred stock, $0.001 par value per share, of which
4,609,062 shares are designated as a class of preferred stock known as "Series A
Preferred Stock," and 3,500,000 shares are designated as a class of preferred
stock known as "Series B Preferred Stock ." 4,596,593 shares of Series A
Preferred Stock are currently issued and outstanding and 3,369,403 shares of
Series B Preferred Stock are currently issued and outstanding (collectively, the
"Company Preferred Stock"). Schedule 4.3.1 sets forth the stock holdings of
Company as of the date of this Agreement, including the name and address of each
Stockholder and the number of Shares per class owned by each such Stockholder.
All of the Company Common Stock and the Company Preferred Stock have been duly
authorized and validly issued, are fully paid and nonassessable, were not issued
in violation of the terms of any Contract binding upon Company, and were issued
in compliance with all applicable Charter Documents of Company and all
applicable federal and state securities or "blue sky" laws and regulations.
Options to purchase 7,250,129 shares of Company Common Stock (the "Company
Options"), including, without limitation, the option grants made by the Company
to ▇▇▇▇▇▇ ▇▇▇▇▇ on November 13, 2000 and December 7, 2000, and a warrant issued
to Dell USA L.P. to purchase 312,500 shares of Company Common Stock (the
"Company Warrant") are outstanding as of the date of this Agreement. No equity
securities of Company, other than the Company Common Stock, the Company
Preferred Stock, the Company Options and the Company Warrant, are issued or
outstanding. There are no preemptive rights to purchase authorized but unissued
shares of the Company Common Stock and the Company Preferred Stock. Except as
set forth above or on Schedule 4.3.1, as of the date of this Agreement there
are: (i) no existing Contracts, subscriptions, options, warrants, calls,
commitments or rights of any character to purchase or otherwise acquire from
Company or, to the Company's knowledge, any of the Stockholders, at any time, or
upon the happening of any stated event, any capital stock or other securities of
Company, whether or not presently issued or outstanding; (ii) no outstanding
securities of Company that are convertible into or exchangeable for capital
stock or other securities of Company; and (iii) no existing Contracts,
subscriptions, options, warrants, calls, commitments or rights to purchase or
otherwise acquire from Company any such convertible or exchangeable securities.
4.3.2 There are no accrued but unpaid dividends on the Company
Preferred Stock.
4.4 Authority and Binding Effect. Company has all requisite corporate
power and authority to execute, deliver and perform this Agreement and the other
Transaction Documents, subject only to the approval of this Agreement (other
than the Schedules and exhibits hereto) and the Merger by the Stockholders. The
execution and delivery of this Agreement and the consummation of the
Transactions will not contravene or violate the Charter Documents of Company.
This Agreement (not including the exhibits hereto) constitutes, and the other
Transaction Documents will constitute, the legal, valid and binding obligation
of Company, enforceable against each of them in accordance with their respective
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar Laws affecting the rights of creditors
generally and general equity principles (regardless of whether enforceability is
considered a proceeding at law or in equity).
4.5 Validity of the Transactions. Neither the execution and delivery of
this Agreement by Company nor the consummation of the Transactions (i) will
contravene or violate any Law or Court Order which is applicable to Company,
(ii) will result in a Default under, or require the consent or approval of any
party to, any Contract (including any Customer Contract) to or by which Company
is a party or otherwise bound, or (iii) require Company to obtain any License
from any federal, state, local or other court or governmental agency or body or
from any other regulatory authority, except (A) for any consents specified in
Schedule 4.5, and (B) for the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware.
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4.6 Restrictions. Neither Company nor, to the knowledge of Company, any
one or more of the Stockholders, is subject to any restrictions or any Court
Order or Law which adversely, to the knowledge of Company, affects or restricts
the ability of Company or one or more of the Stockholders to consummate the
Transactions.
4.7 Third-Party Options. Company is not party to any existing
Contracts, options or commitments pursuant to which Company has granted rights
to any third party to acquire Assets which individually or in the aggregate are
material to the Company's business, other than licenses or sales of Assets in
the ordinary course of business.
4.8 Financial Statements; Books of Account.
4.8.1 Company has previously delivered to SCT true and correct
copies of all of the Financial Statements and the Interim Financial Statements.
The Financial Statements have been prepared in accordance with the applicable
books and records of Company and have been prepared in conformity with GAAP,
consistently applied during the related periods (except as expressly noted in
the notes thereto) and fairly present in all material respects the financial
condition, results of operations and the cash flows of Company at the date and
for the periods covered. The Financial Statements have been audited and
certified by Ernst & Young LLP, independent certified public accountants. Except
for (i) changes resulting from normal year-end audit adjustments which will not
individually or in aggregate have a Material Adverse Effect and (ii) the absence
of notes, the Interim Financial Statements have been prepared in accordance with
the applicable books and records of Company and have been prepared in conformity
with GAAP, consistently applied during the related periods. All Liabilities of
Company as of August 31, 2002 required to be reflected or reserved for by GAAP
are reflected or reserved for in the Interim Financial Statements. The Interim
Financial Statements fairly present in all material respects the financial
condition, results of operations and the cash flows of Company at the date and
for the period set forth therein.
4.8.2 Company has not maintained any bank account or used any
corporate funds except for bank accounts and funds which have been and are
reflected in the normally maintained books and records of Company.
4.9 Taxes.
4.9.1 Company has duly and timely filed or delivered all
material Tax Returns required to be filed or delivered on or before the Closing
Date, all such Tax Returns were prepared or completed in a manner consistent
with prior practice of Company with respect to returns, reports and other
filings concerning the income, properties or operations of Company, except as
otherwise required by law or regulation or otherwise agreed to by SCT prior to
the filing thereof, and all such Tax Returns are true, correct and complete.
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4.9.2 Company has paid in full on a timely basis all material
Taxes required to be paid by it on or before the Closing Date, whether or not
shown on any Tax Return.
4.9.3 The amount of Company's liability for unpaid Taxes as of
the date of the Interim Financial Statements will not exceed the amount of the
current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Interim Financial Statements, and the amount of Company's liability
for unpaid Taxes for all periods or portions thereof ending before the Closing
will not exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) as such accruals are reflected on the
books and records of Company on the Closing Date.
4.9.4 There are no ongoing audits, examinations or claims
against Company for Taxes, and no written notice of any audit, examination or
claim for Taxes, whether pending or threatened, has been received. To Company's
knowledge, no such audits, examinations or claims have otherwise been
threatened. There are no powers of attorney relating to Tax matters concerning
Company.
4.9.5 Company has deducted or withheld and paid over to the
proper taxing authorities all Taxes required as of the Closing to have been
deducted or withheld and paid over, and complied with all information reporting,
withholding and backup withholding requirements, including maintenance of
required records with respect thereto.
4.9.6 There are (and as of immediately following the Closing
there will be) no Liens, other than Permitted Liens, on the Assets of Company
relating to or attributable to Taxes.
4.9.7 To the knowledge of Company, there is no reasonable
basis for the assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Lien on the Assets of Company or
otherwise might reasonably be expected to have a Material Adverse Effect.
4.9.8 Company has not at any time been a party to a Tax
sharing, Tax indemnity or Tax allocation agreement, and Company has not assumed
the Tax liability of any other Person under any Contract.
4.9.9 Company (a) has never been a member of an affiliated
group of corporations filing a consolidated federal income Tax Return, (b) does
not own, directly or indirectly, any interest or investment (whether equity or
debt) in any corporation, partnership, limited liability company, trust joint
venture or other legal entity, and (c) has no liability for the Taxes of any
person or other taxpayer under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
or otherwise.
4.9.10 There is no agreement, plan or arrangement, written or
otherwise, covering any employee or independent contractor or former employee or
independent contractor of Company or any of its Affiliates, that, considered
individually or considered collectively with any other such agreement, plan or
arrangement, will, or could reasonably be expected to, give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G of the Code or that would be subject to an excise tax under Section
4999 of the Code.
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4.9.11 Company is not now and has never been a "United States
real property holding corporation," as defined in Section 897(c)(2) of the Code
and Treasury Regulation Section 1.897-2(b), and the Company has filed with the
Internal Revenue Service all statements, if any, with its Tax Returns which are
required under Treasury Regulation Section 1.897-2(h).
4.9.12 Company has had a taxable year ended on December 31 in
each year since its inception on June 24, 1998 (the "Inception Date").
4.9.13 Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not changed
since the Inception Date.
4.9.14 Company has never filed a consent under Section 341(f)
of the Code concerning collapsible corporations.
4.9.15 Company has not been either a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (a) in the two years prior to the date
hereof or (b) in a distribution which could otherwise constitute part of a
"plan" or "series of related transactions" (within the meaning of Section 355(e)
of the Code) in connection with the Merger.
4.10 Undisclosed Liabilities. Company has no Liabilities except for:
4.10.1 those Liabilities set forth or reserved for on the
Interim Financial Statements and not heretofore paid or discharged;
4.10.2 those Liabilities arising in the ordinary course of
business under any Contract (including Customer Contracts) listed on a Schedule
to this Agreement; and
4.10.3 those Liabilities arising in the ordinary course of
business since the Balance Sheet Date and not heretofore paid or discharged.
4.11 Intellectual Property.
4.11.1 Schedule 4.11.1 contains a complete and accurate list
of all Registered Owned Proprietary Rights, specifying as to each such item, as
applicable: (a) the owner(s) of the item, (b) the jurisdiction(s) in which the
item is issued or registered or in which any application for issuance or
registration has been filed, (c) the respective issuance, registration, or
application number(s) of the item, and (d) the date(s) of application and
issuance or registration of the item.
4.11.2 Schedule 4.11.2 contains a true and complete list of
all Company Products, including all trademarks and service marks used in
connection therewith. Schedule 4.11.2 also contains a true and complete list of
all third party Intellectual Property incorporated into the Company Products,
specifying as to each item of third party Intellectual Property the Company
Product(s) into which it is incorporated.
4.11.3 Schedule 4.11.3 contains a true and complete list of
(a) all Software (other than Software that is licensed to Company under
non-exclusive end user licenses that are generally commercially available)
owned, in whole or part, by third parties and licensed to Company (whether for
internal use, sub-licensing or re-licensing to third parties, or otherwise),
with software that is exclusively licensed to Company specifically designated on
Schedule 4.11.3, (b) all licenses and agreements pursuant to which Company
licenses or sublicenses such Software from third parties, and (c) all agreements
pursuant to which Company distributes the Company Products to other persons
through a third party that has the exclusive or non-exclusive right to
distribute Company Products (the "Distributor Agreements"), with such exclusive
Distributor Agreements specifically designated on Schedule 4.11.3 as exclusive
Distributor Agreements. Neither Company, nor, to the knowledge of Company, any
other party is in material breach of or default under any such license or
agreement, and each such license or agreement is as of the date hereof and
immediately following the Closing shall be in full force and effect.
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4.11.4 No third party that has licensed any Intellectual
Property to Company has ownership rights or license rights to improvements or
modifications made by or for Company in such Intellectual Property.
4.11.5 Except as set forth on Schedule 4.11.5, the Company
Intellectual Property consists entirely of the Owned Intellectual Property, the
Company Products and the Software listed in Schedule 4.11.3.
4.11.6 All Intellectual Property developed by, on behalf of or
for Company was conceived, reduced to practice, reduced to tangible form,
written or otherwise created solely by employees, agents, consultants or
independent contractors of Company who are either (a) parties to
"work-made-for-hire" agreements under which Company is deemed to be the original
owner and author of all Proprietary Rights therein, or (b) have executed a valid
and enforceable assignment or other agreement to irrevocably (to the extent
possible under applicable law, such as the termination of transfers described in
17 U.S.C. ss.304) assign in favor of Company all of such employee's, agent's,
consultant's or independent contractor's right, title or interest in the
Intellectual Property. Except as set forth on Schedule 4.11.6, Company has
recorded each such assignment relating to Registered Owned Proprietary Rights
with the relevant governmental authorities, including without limitation the
U.S. Patent and Trademark Office, the U.S. Copyright Office, and their
respective equivalents in any relevant foreign jurisdiction.
4.11.7 No current or former Stockholder, director, officer,
employee , consultant or independent contractor of Company or any Affiliate of
Company has asserted any claim of ownership of, or interest in, the Owned
Intellectual Property or any Company Products. No Affiliate of Company has
asserted or may assert any claim of ownership of, or interest in, any Owned
Intellectual Property or Company Products.
4.11.8 Company has taken all steps that are reasonably
required to protect Company's rights in the Owned Intellectual Property, Company
Products and all Confidential Information of Company.
4.11.9 The Company's business as currently conducted and the
Company Intellectual Property do not infringe, dilute, misappropriate or
otherwise violate the Proprietary Rights of any third party, and no claim is
pending or has been made, notice given, or dispute arisen to that effect. To
Company's knowledge, no third party is infringing or misappropriating any
Proprietary Rights of Company.
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4.11.10 Except as set forth on Schedule 4.11.10, Company owns
all right, title and interest in and to all of the Owned Intellectual Property,
all such Owned Intellectual Property is valid, in full force, and free and clear
of all Liens other than Permitted Liens, and neither the Owned Intellectual
Property nor any Company Products are the subject of any cancellation or
reexamination proceeding or any other proceeding or outstanding decree, order,
judgment or settlement agreement or stipulation that restricts in any manner the
use, transfer or licensing thereof by Company or affects the validity, use or
enforceability of the Owned Intellectual Property and/or Company Products;
provided that the foregoing language of this Section 4.11.10 will not be deemed
to be a warranty with respect to the existence or non-existence of prior art
relating to any patent application, or a warranty of noninfringement of any work
of authorship, trademark, service ▇▇▇▇, trade dress, or trade secret used or
created prior to Company's Proprietary Rights in the Owned Intellectual Property
or Company Products, regardless of whether such Proprietary Rights are
Registered Owned Proprietary Rights, or not, and provided that the foregoing
language of this Section 4.11.10 will not be deemed to be a warranty with
respect to any office action issued by a government agency relating to any of
the Registered Owned Intellectual Property. Company is the applicant of record
in all Registered Owned Proprietary Rights indicated in Schedule 4.11.1, and no
opposition, extension of time to oppose, interference, rejection, or refusal to
register has been received in connection with any such application in the United
States, Canada or Great Britain, provided that the foregoing will not be deemed
to be a warranty with respect to the existence or non-existence of prior art
relating to any patent application. Each item of Registered Owned Proprietary
Rights is in compliance with all formal legal requirements (including payment of
filing, examination and maintenance fees and proofs of use) and is valid and
subsisting; provided that the foregoing will not be deemed to be a warranty with
respect to the existence or non-existence of prior art relating to any patent
application, or a warranty of noninfringement of any work of authorship,
trademark, service ▇▇▇▇, trade dress, or trade secret used or created prior to
Company's Proprietary Rights in the Registered Owned Proprietary Rights,
regardless of whether such Proprietary Rights are Registered Owned Proprietary
Rights, or not. Other than as listed in Schedule 4.11.10, there are no actions
that must be taken by Company within 120 days of the date of this Agreement,
including without limitation the payment of any fees or responses to any office
actions, for the purposes of obtaining, maintaining, preserving or renewing any
Registered Owned Proprietary Rights. Other than as disclosed in patent
applications, there is no prior art that Company has actual knowledge of that is
material to any of Company's Patents.
4.11.11 Company has the right to use, pursuant to valid
licenses, all Software development tools, library functions, compilers and all
other third-party Software that are used in or necessary to the conduct of the
Company's business as currently conducted or that are required to create,
modify, compile, operate or support any Software or is incorporated into any of
the Company Products. Except as set forth on Schedule 4.11.11, without limiting
the foregoing, no open source or public library Software, including any version
of any Software licensed pursuant to any GNU public license, is incorporated
into any Company Product or any Owned Intellectual Property.
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4.11.12 Except as set forth on Schedule 4.11.12, no government
funding, facilities of a university, college, other educational institution or
research center or funding from third parties was used in the development of any
Owned Intellectual Property, in such a manner that would affect Company's
exclusive ownership of the Owned Intellectual Property. No current or former
employee, agent, consultant or independent contractor of Company, who was
involved in, or who contributed to, the creation or development of any Owned
Intellectual Property, has, to Company's knowledge, performed services for the
government, university, college, or other educational institution or research
center during a period of time during which such employee, agent, consultant or
independent contractor was also performing services for Company, in such a
manner that would affect Company's exclusive ownership of the Owned Intellectual
Property.
4.11.13 The consummation of the Transactions will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of any Contracts relating to Intellectual Property to which Company
is a party. Following the Closing, SCT and/or any of its Affiliates will be
permitted to exercise all of Company's rights under such Contracts to the same
extent Company would have been able had the Transactions not occurred, and
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which Company would otherwise be required to
pay.
4.11.14 Neither this Agreement nor the Transactions will
result in (a) SCT or any of its Affiliates granting to any third party any right
to or with respect to any Intellectual Property owned by, or licensed to, either
of them, including without limitation the release of any source code from any
escrow, or (b) SCT or any of its Affiliates being bound by, or subject to, any
non-compete or other restriction on the operation or scope of its current and
future businesses.
4.11.15 To Company's knowledge, no (a) Company Product, (b)
material published or distributed by Company, or (c) conduct or statement of
Company, constitutes a defamatory statement or, to the knowledge of Company,
false advertising, or otherwise violates any Law.
4.11.16 Company has not disclosed, or allowed to be disclosed,
verbally or in writing, any Confidential Information of Company to any Person
other than a Person having a written obligation to Company to hold the
Confidential Information in strict confidence and use the Confidential
Information only for the benefit of Company.
4.11.17 Schedule 4.11.17 contains a complete and accurate list
of (a) all Contracts relating to the Company Intellectual Property pursuant to
which Company has a present or continuing obligation to make any payments,
including without limitation royalty payments, to any third party, and (b) with
respect to the foregoing Contracts, the specific present or continuing
obligation to make payments to the third party, including, without limitation,
the specific royalty fees and payment schedules.
4.11.18 Company has no present or future commitments to
incorporate any functionality or enhancement (including, without limitation,
corrections, fixes, resolutions, patches, avoidance procedures, work-arounds or
the like to alleged defects or errors) into any standard general release version
of the Company Products.
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4.11.19 Each and all of the Company Products (including
Software, products and service offerings currently under development): (a) will
record, store, process, calculate and present calendar dates falling on and
after (and if applicable, spans of time including) January 1, 2000, and will
calculate any information dependent on or relating to such dates in the same
manner, and with the same functionality, data integrity and performance, as the
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates; and (b) will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
4.12 Accounts Receivable. Schedule 4.12 sets forth a list of all
accounts receivable as of September 20, 2002. All Accounts Receivable of Company
as set forth on Schedule 4.12, (a) are valid receivables and have arisen only in
the ordinary course of business for goods sold and delivered or services
performed and (b) to Company's knowledge, are collectible in full as of the date
of this Agreement at the recorded amounts thereof, net of any allowance for
doubtful accounts specifically established therefor, (free of any, and subject
to no, defenses, setoffs or counterclaims) in the ordinary course of business
(without resort to Litigation or assignment to a collection agency), but, except
as indicated in Annex 4.12 to the Disclosure Schedule (and then only with
respect to the unbilled items disclosed therein), in no event later than 180
days after the Closing Date; provided that the representation in clause (b)
hereof shall not be deemed to be breached to the extent any party owing an
Account Receivable fails to pay such Account Receivable as a result of the
announcement or pendency of the Transactions or the consummation of the Merger.
4.13 Intentionally Omitted.
4.14 Title to Assets. Company has good and valid title to, or, in the
case of leased properties and Assets, valid leasehold interests in, all of its
tangible Assets, including the tangible assets and properties set forth on the
Interim Financial Statements (except for such as may have been disposed of in
the ordinary course of business since the Balance Sheet Date), free and clear of
all Liens, except Permitted Liens and Liens reflected in the balance sheet set
forth in the Interim Financial Statements.
4.15 Condition of Assets. The material equipment which are part of the
Assets (i) are in good operating condition and repair, subject to normal wear
and tear, and are usable in the ordinary course of business, (ii) conform in all
material respects to all applicable Laws relating to their use and operation as
such Assets are currently used in the conduct of the Company's business and
(iii) are adequate for the operation of the Company's business as currently
conducted.
4.16 Real Property. All real property (including, all interests in and
rights to real property) and improvements located thereon which are leased by
Company as of the date of this Agreement are listed on Schedule 4.16
(individually, a "Lease" and collectively, the "Leases"). Company has no
ownership interests of any kind in, or rights to, any real property or
improvements, as of the date of this Agreement except solely for leasehold
interests in the real property and improvements listed on Schedule 4.16 pursuant
to the leases described on Schedule 4.16. Each of the Leases is in full force
and effect in accordance with its respective terms and Company is the holder of
the lessee's or tenant's interest thereunder. To the knowledge of Company, (i)
there exists no default under any Lease and (ii) no circumstance exists which,
with the giving of notice, the passage of time or both, is reasonably likely to
result in such a default. Company has not received any written notice from a
third party that it has not complied with and timely performed all conditions,
covenants, undertakings and obligations on its part to be complied with or
performed under each of the Leases. Company has paid all rents and other charges
to the extent due and payable under the Leases. There are no leases, subleases,
licenses, concessions or any other contracts or agreements granting to any
person or entity other than Company any right to the possession, use, occupancy
or enjoyment of any real property leased by Company or any portion thereof.
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4.17 Contracts.
4.17.1 Schedule 4.17.1 lists Company's top 20 Customer
Contracts as of the date of this Agreement, ranked by contract value.
4.17.2 Schedule 4.17.2 sets forth, as of the date of this
Agreement, all leases of personal property providing for annual rentals in
excess of $50,000.
4.17.3 Except as disclosed on Schedule 4.17.3, as of the date
of this Agreement Company is not a party to any:
(a) Contract with any present employee, consultant or
independent contractor or any former employee;
(b) Contract (other than a Customer Contract) for the
future purchase of, or payment for, supplies, products, Intellectual Property or
services or the use thereof providing for annual payments in excess of $50,000;
(c) Contract (other than a Customer Contract) to sell
or supply products or to perform services providing for annual payments in
excess of $50,000, other than any Contract for consulting services entered into
with a customer in the ordinary course of business;
(d) representative or sales agency Contract;
(e) Contract limiting or restraining it from engaging
or competing in any lines of business with any Person;
(f) franchise, distributorship, co-development, joint
marketing, value-added reseller, alliance or other similar agreement providing
for annual payments in excess of $50,000;
(g) material Contract (as such term is defined in
item 10 of Rule 601 of Regulation S-K under the Securities Act of 1933, as
amended) not otherwise disclosed herein.
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4.17.4 Except as set forth on Schedule 4.17.4, as of the date
of this Agreement, Company is not a party to any Contract to which license fees
or any other fees owed after the date hereof to Company are subject to most
favored nations or customer pricing.
4.17.5 Except as set forth on Schedule 4.17.5, as of the date
of this Agreement, none of the Contracts listed on Schedule 4.17.1 hereof
contain provisions through which price increases in annual recurring fees owed
after the date hereof to Company are limited in any material respect.
4.17.6 Except as set forth on Schedule 4.17.6, as of the date
of this Agreement, Company is not a party to any Customer Contract to which any
party other than Company has after the date hereof an express right of refund of
license or other fees or an express right of liquidated damages.
4.17.7 Except as set forth on Schedule 4.17.7, as of the date
of this Agreement, none of the Contracts listed on Schedule 4.17.1 hereof
contain provisions through which Company has an obligation after the date hereof
to provide fixes, corrections or resolutions to alleged defects or errors in the
Company Products within specified time periods.
4.17.8 Except as set forth on Schedule 4.17.8(a), as of the
date of this Agreement, Company is not a party to any Contracts in which the
Company Products or Company services are subject to acceptance testing or other
acceptance criteria after the date hereof. Except as set forth on Schedule
4.17.8(b), all of the Contracts set forth on Schedule 4.17.8(a) have been deemed
accepted and Company has fully performed all of its obligations relating to
acceptance.
4.17.9 All of the Contracts listed in Schedules 4.17.1 through
4.17.8 are valid, binding and enforceable in accordance with their terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium or similar Laws affecting the rights of creditors generally and
general equity principles (regardless of whether enforceability is considered a
proceeding at law or in equity). Company has fulfilled, and has taken all
action, on or prior to the date of this Agreement, consistent with Company's
past practices, which Company would typically take in the ordinary course of
business to enable it to fulfill when due, all of its material obligations under
each of such Contracts. Company and, to Company's knowledge, all other parties
to such Contracts have materially complied with the provisions of each such
Contract. Neither Company nor, to Company's knowledge, any other party to any
such Contract is in material Default thereunder and no written notice of any
claim of material Default has been given to, or by, Company. To Company's
knowledge, no customer has taken any action permitted to be taken under any such
Contract that would be reasonably likely to prevent Company from receiving
payment for services rendered under any such Contract after the completion of
the Transactions. With respect to any of such Contracts that are leases, Company
has not received any notice of cancellation or termination under any option or
right reserved to the lessor, or any notice of Default, thereunder.
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4.18 Employees/Independent Contractors.
4.18.1 Schedule 4.18.1 sets forth the names of each of the
employees of Company as of the date hereof (each an "Employee" and collectively,
the "Employees"), together with the following information for each of the
Employees: current annual salary rates or current hourly wages, position, site
of employment, date of the last salary increase, date of commencement of
employment and a summary of salary, bonuses and other compensation, if any, paid
or payable for or in respect of that portion of the 2002 calendar year ending on
August 31, 2002. Each of the Employees is employed by Company on an at-will
basis, and Company has no Contract with any of the Employees, except as set
forth on Schedule 4.18.1.
4.18.2 Schedule 4.18.2 sets forth the names of each
independent contractor retained by Company as of the date hereof and the current
rate of compensation paid to each such independent contractor. Schedule 4.18.2
specifies the site at which each such independent contractor performs services.
All such independent contractors have in the past and continue to be legally
treated as non-employees for all federal, state, local and foreign tax purposes,
as well as all ERISA and other employee benefit purposes. There has been no
determination by any governmental authority, or by any tribunal or commission,
that any such independent contractor (or any other independent contractor who
has previously rendered services to Company) constitutes an employee of Company.
4.19 Licenses. Schedule 4.19 sets forth a complete list of all Licenses
used in the operation of Company's business or otherwise held by Company.
Company owns, possesses or lawfully uses in the operation of its business all
Licenses which are necessary to conduct the business as now conducted or to the
ownership of the Assets, free and clear of all Liens except Permitted Liens,
except where the failure to own, possess or use any such License would not have
a Material Adverse Effect. Company is not in Default, nor has it received any
notice of, nor is Company aware of, any claim of Default, with respect to any
such License. Except as otherwise governed by Law, all such Licenses are
renewable by their terms or in the ordinary course of business without the need
to comply with any special qualification procedures or to pay any amounts other
than routine filing fees and will not be adversely affected by the completion of
the Transactions. To Company's knowledge, no present Stockholder, director,
officer or employee of Company, any Affiliates of any of them, owns or has any
proprietary, financial or other material interest (direct or indirect) in any
License which Company owns, possesses or uses. Nothing in this Section 4.19
constitutes a warranty regarding Intellectual Property, Proprietary Rights,
Company Intellectual Property, Owned Intellectual Property or Registered Owned
Intellectual Property.
4.20 Compliance with Law and Court Orders. Company is not in violation
of any Law or Court Order, and the Assets have not been used or operated by
Company or any other Person in violation of any Law or Court Order. All Court
Orders to which Company is a party or subject are listed on Schedule 4.20.
Company has made all filings or notifications required to be made by it under
any Laws applicable to Company. Company and to the knowledge of Company, no
officer, employee or agent of, or any consultant to Company (a) has used any
corporate funds of Company to make any payment to any officer or employee of any
government, or to any political party or official thereof, where such payment
either (i) was, at the time, unlawful under Laws applicable thereto; or (ii)
was, at the time, unlawful under the Foreign Corrupt Practices Act of 1977, as
amended; or (b) has made or received an illegal payment, bribe, kickback,
political contribution or other similar questionable illegal payment in
connection with the operation of the business.
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4.21 Claims. Except as disclosed on Schedule 4.21: (a) there is no
Litigation pending or, to the Company's knowledge, threatened against Company;
(b) there is no material dispute pending or threatened in writing between
Company and any of its suppliers; (c) no claim has been asserted that would be
reasonably likely to result in Litigation against Company; and (d) Company does
not know of any event that has occurred that would be reasonably likely to
result in Litigation having a Material Adverse Effect. All pending or, to
Company's knowledge, threatened Litigation is fully covered by insurance except
to the extent described in Schedule 4.21.
4.22 Insurance. Schedule 4.22 hereto lists all policies of fire,
liability, workmen's compensation, life, property and casualty and other
insurance owned or held by Company as of the date of this Agreement, copies of
which have been made available to SCT. All such policies are in full force and
effect and Company has not committed any material Default thereunder. No written
notice of cancellation or non-renewal has been received by Company with respect
to any of such policies.
4.23 Labor Matters.
4.23.1 Company does not have, never has had nor is negotiating
any collective bargaining agreements, labor contracts, letters of understanding
or any other Contract with any labor union or other representative of employees.
There has been no labor union organizing activities or any other work protected
concerted activities against Company. There have been no strikes, slowdowns,
picketing or work stoppages by any union or other group of employees against
Company, nor have there been any unfair labor practice charges or complaints,
grievances, administrative, arbitration or court proceedings or orders between
Company and any present or former employees of Company. No secondary boycott
with respect to Company's products, lockout by Company of any of its employees
or other labor trouble, occurrence, event or condition of a similar character,
has occurred or been threatened.
4.23.2 To the knowledge of Company, no claim or charge has
been made or filed by any person, nor has Company received notice reflecting an
intention to make any claim or charge, under any Law relating to employees or
employment practices. Company has not received notice of the intent of any
federal, state, local or foreign governmental authority responsible for the
enforcement of labor or employment Laws to conduct an investigation with respect
to or relating to Company and no such investigation is in progress, has occurred
in the past or, to Company's knowledge, is threatened.
4.23.3 Company has complied and is in material compliance with
all Laws relating to wages, hours, compensation and overtime compensation,
benefits, discrimination in employment, immigration, unemployment insurance,
workers' compensation insurance and labor relations, and Company is not liable
for any arrears of wages, taxes or penalties for failure to comply with any of
the foregoing.
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4.23.4 Company has never taken and is not taking any action
that would require any compliance under the Worker Adjustment and Retraining
Notification Act or similar state or local law ("WARN"). If applicable, Company
shall comply with its obligations under WARN and make the appropriate
notifications thereunder.
4.24 Employee Benefit Plans.
4.24.1 Attached hereto as Schedule 4.24 is a list of each
"employee benefit plan", each "employee welfare benefit plan", each "employee
pension benefit plan", each "multiemployer plan" and each "multiple employer
welfare arrangement" (as defined in Sections 3(3), 3(1), 3(2), 3(37) and 3(40),
respectively, of ERISA) and each other plan, program, contract, agreement or
other arrangement providing for compensation, bonuses, deferred compensation,
incentive compensation, stock awards or other equity-based incentive awards,
severance or termination pay, hospitalization or other medical, life, disability
or other insurance benefits, supplemental unemployment benefits, profit-sharing,
savings, pension, or retirement benefits, including each other employee benefit
plan, program, agreement or arrangement, sponsored, maintained or contributed to
or required to be sponsored, maintained, or contributed to at any time (whether
presently, in any time in the past or in the future) by Company or any ERISA
Affiliate (including, any such plan or arrangement created by any agreements,
including any employment agreements and any other agreements containing "golden
parachute" provisions disclosed in Schedule 4.17.4), together with copies of any
trusts related thereto and a classification of employees covered thereby
(collectively, the "Plans"). Schedule 4.24 specifically identifies each Plan
that constitutes an "employee pension plan" or "employee welfare benefit plan"
(within the meaning of Section 3(2) or 3(1) of ERISA, respectively) that has
been terminated.
4.24.2 Company has no liability with respect to any benefit
plans or arrangements other than pursuant to the Plans. All Plans are in
material compliance with all applicable provisions of ERISA, the Code and the
regulations issued thereunder, as well as with all other applicable Laws, and
have been administered, operated and managed in accordance with their governing
documents.
4.24.3 The Plans specifically identified on Schedule 4.24 as
"Qualified Plans" are the only Plans that are intended to meet the requirements
of Section 401(a) of the Code or constitute "employee pension plans" as that
term is defined in Section 3(2) of ERISA (a "Qualified Plan"). Each of the
Qualified Plans have been determined by the Internal Revenue Service to meet in
form and operation and currently meets in form and operation the requirements of
Section 401(a) of the Code. Company has provided or made available copies of the
current plan determination letters, most recent actuarial valuation reports, if
any, most recent Form 5500, or, as applicable, Form 5500-C/R filed with respect
to each such Plan and most recent trustee or custodian report. All reports and
other documents required to be filed with any governmental agency or distributed
to plan participants or beneficiaries (including, annual reports, summary annual
reports, actuarial reports, PBGC-1 Forms, audits or Tax Returns) have been
timely filed and/or distributed.
4.24.4 Neither Company nor any ERISA Affiliate, nor any Plan,
nor any trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which Company or any ERISA
Affiliate, any Plan, any such trust, or any trustee or administrator thereof, or
any party dealing with any Plan or any such trust is subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed
pursuant to Section 4975 or 4976 of the Code.
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4.24.5 Neither Company nor any ERISA Affiliate, has ever
maintained, sponsored, contributed to or otherwise been or at any time will be
(including, without limitation, at Closing) obligated or required to make
contributions to any plan subject to Title IV of ERISA of Section 412 of the
Code.
4.24.6 Company has no plan or commitment, whether or not
legally binding, to create any additional Plan or to modify or change any
existing Plan (except to the extent required by Law or to conform any such Plan
to the requirements of any applicable Law). All Plans may be amended or
terminated without penalty by Company at any time on or after the Closing.
4.24.7 To the knowledge of Company, all persons classified by
Company as independent contractors satisfy and have at all times satisfied the
requirements of applicable Law to be so classified; Company has fully and
accurately reported compensation of such persons on IRS Forms 1099 when required
to do so; and Company has no obligations to provide benefits with respect to
such persons under Plans or otherwise. Company does not receive and has never
received any services from any "leased employees" as defined in Section 414(n)
of the Code.
4.24.8 Except as set forth on Schedule 4.24:
(a) there have been no terminations, partial
terminations or discontinuance of contributions to any Qualified Plan without
notice to and issuance of a favorable determination letter by the Internal
Revenue Service;
(b) with respect to Plans which qualify as "group
health plans" under Section 5000(b)(1) of the Code and Sections 607(1) and
733(a) of ERISA and related regulations, Company has materially complied (and on
the Closing Date will have complied) with all reporting, disclosure, notice,
election, coverage and other benefit requirements imposed under Sections 4980B
and 9801-9833 of the Code and ERISA and other applicable Laws; to Company's
knowledge, Company does not have any direct or indirect liability or is (and
will be) subject to any loss, assessment, excise tax, penalty, loss of federal
income tax deduction or other sanction, arising on account of or in respect of
any direct or indirect failure by Company, at any time prior to the Closing
Date, to comply with any such federal or state requirement, which is capable of
being assessed or asserted before or after the Closing Date directly or
indirectly against Company with respect to such group health plans;
(c) No Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect to
current or former employees, directors or consultants of Company or any ERISA
Affiliate beyond their retirement or other termination of service other than:
(A) coverage mandated by Law or (B) death or retirement benefits under a Plan
qualified under Section 401(a) of the Code.
(d) Company is not now nor within the past five years
has it been a member of a "controlled group" as defined in ERISA Section
4001(a)(14);
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(e) Company has not incurred any liability for
excise, income or other Tax or penalty with respect to any Plan and there is no
pending or, to the knowledge of Company, threatened Litigation, audit,
investigation, or disputed claim, settlement or adjudication with respect to any
Plan, or (other than routine claims for benefits) with respect to any fiduciary,
administrator, party in interest or sponsor thereof (in their capacities as
such);
(f) each Plan under which Company has exercised or
will exercise discretion necessary or appropriate to effect the Transactions
validly provides Company with the necessary discretion, and Company has validly
taken all such discretionary actions necessary under each Plan to allow for the
completion of the Transactions, or will validly take such action prior to
Closing;
(g) no Plan contains any provision or is subject to
any law that would prohibit the Transactions or that would give rise to any
vesting or acceleration of benefits, severance, termination, or other payments
or liabilities as a result of the Transactions, and no amounts payable or
benefits provided under the Plans or any other agreement or arrangement with
respect to which SCT, Acquisition Sub, Company or any ERISA Affiliate may have
any liability could give rise to the payment of any amount that would fail to be
deductible for federal income tax purposes by virtue of Section 162(m) or 280G
of the Code.
(h) Company has paid all amounts that it is required
to pay as contributions to the Plans as of the last day of the most recent
fiscal year of each of the Plans and as required in accordance with GAAP; the
Financial Statements as of the Balance Sheet Date reflect the approximate total
pension, medical and other benefit expense for all Plans as of the date thereof;
and
4.25 Transactions with Affiliates. Except as disclosed in Schedule
4.17.3 or Schedule 4.25, no Affiliate of Company has: (a) borrowed money or
loaned money to Company which remains outstanding or (b) any contractual
arrangements with Company involving future payments to or by Company exceeding
Fifty Thousand Dollars ($50,000) in the aggregate.
4.26 Absence of Certain Changes. Except as contemplated by this
Agreement or as set forth on Schedule 4.26, since the Balance Sheet Date through
the date of this Agreement, Company has conducted its business in the ordinary
course and there has not been with respect to its business:
4.26.1 any change that has had or would be reasonably expected
to have a Material Adverse Effect;
4.26.2 any increase in the compensation payable or to become
payable to any director, employee or consultant, except for increases for such
directors, employees or consultants made in the ordinary course of business;
4.26.3 any other change in any employment or consulting
arrangement, except for such changes made in the ordinary course of business;
4.26.4 any sale, assignment or transfer of any material
Assets, other than those made in the ordinary course of business;
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4.26.5 other than in the ordinary course of business, any
waiver or release of any material claim or right or cancellation of any material
debt held;
4.26.6 any distributions or payments to any Affiliate of
Company;
4.26.7 any capital expenditure involving in any individual
case more than Twenty Thousand Dollars ($20,000);
4.26.8 declaration or payment of any dividend or other
distribution on its capital stock; or
4.26.9 any incurrence of any debts for money borrowed in any
individual case more than Twenty Thousand Dollars ($20,000), other than in the
ordinary course of business.
4.27 Environmental Matters. Except as disclosed on Schedule 4.27
hereto, (i) no release of Hazardous Materials (as defined in this Section 4.27)
has occurred at or from any property during the period it was owned or leased by
Company or, to the knowledge of Company at any other time as would be reasonably
likely to create cleanup, remediation or reporting obligations or liability
under any Environmental Law or Environmental Permit on the part of Company, or
to otherwise result in an Environmental Claim against the Company or a Material
Adverse Effect, (ii) there are no past, pending, or, to the knowledge of
Company, threatened Environmental Claims (as defined in this Section 4.27)
against Company, (iii) there are no underground storage tanks owned by Company,
or, to the knowledge of Company, located at any facility owned or operated by
Company, (iv) Company has not received a request under any of the Environmental
Laws for information relating to any of the property now or at any time owned,
operated, leased or otherwise used by Company, (including any off-site
location); (v) to the knowledge of Company, there is no asbestos-containing
material, lead-based paint or equipment containing polychlorinated biphenyls
located at any of the facilities or properties now used by Company, (vi) to the
knowledge of Company, none of the properties owned, operated, leased or
otherwise used by Company are listed on the National Priorities List of sites
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended (42 U.S.C. 9601 et seq.) ("CERCLA"), the CERCLA Information System,
or any comparable state or local environmental database, (vii) to the knowledge
of Company, there is no liability or obligation under any Environmental Law or
Environmental Permit with respect to the cleanup or investigation at any
facility or real property leased by the Company (whether on-site or off-site)
resulting from the presence, disposal or treatment (with a transporter or
otherwise) of Hazardous Material caused by Company, or to the knowledge of
Company, by any other party, and (viii) to the knowledge of Company, there is no
further remediation or other corrective action required with respect to the
Company's facility located at ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
("Salt Lake Facility") that would result in liability to Company or adversely
impact, in any manner, Company's occupancy or use of the property. As used in
this Agreement:
(a) "Environmental Claims" means any and all
administrative or judicial actions, suits, orders, claims, liens, notices of
claims, investigations, violations or proceedings related to any applicable
Environmental Law or any Environmental Permit brought, issued or asserted by a
governmental authority or third party for compliance, damages, penalties,
removal, response, remedial or other action pursuant to any applicable
Environmental Law or for personal injury or property damage resulting from the
release of a Hazardous Material at, to or from any facility or property of
Company or any facility or property at which Company disposed or arranged for
the disposal or treatment (with a transporter or otherwise) of Hazardous
Materials, including without limitation the employees of Company seeking damages
for exposure to Hazardous Materials;
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(b) "Environmental Laws" means all federal, state and
local laws, statutes, ordinances, codes, rules and regulations related to
protection of the environment, natural resources or the handling, use, recycle,
generation, treatment, storage, transportation or disposal of Hazardous
Materials (including, without limitation, safety and health issues arising to of
such activities), and any common law cause of action relating to the
environment, natural resources, safety, health or the management of or exposure
to Hazardous Materials, all as amended as of the date of this Agreement;
(c) "Environmental Permit" means all permits,
licenses, approvals, authorizations or consents required by any governmental
authority under any applicable Environmental Law and includes any and all
orders, consent orders or binding agreements issued or entered into by a
governmental authority under any applicable Environmental Law; and
(d) "Hazardous Material" means any hazardous, toxic
or radioactive substance, material or waste which is regulated as of the Closing
Date by any state or local governmental authority or the United States of
America, including without limitation any material or substance that is: (A)
defined as a "hazardous substance", "regulated substance" or "solid waste" under
applicable state law, (B) petroleum, petroleum products or wastes, (C) asbestos,
(D) designated as a "hazardous substance" pursuant to Section 311 of the Federal
Water Pollution Control Act, as amended, 33 U.S.C.ss.1251 et seq. (33
U.S.C.ss.1321), (E) defined as a "hazardous waste" pursuant to Section 1004 of
the Resource Conservation and Recovery Act, as amended, 42 U.S.C.ss.6901 et seq.
(42 U.S.C. ss.6903), (F) defined as a "hazardous substance" pursuant to Section
101 of the CERCLA, (G) defined as a "regulated substance" pursuant to Section
9001 of the Resource Conservation and Recovery Act, as amended, 42 U.S.C.ss.6901
et seq. (42 U.S.C.ss.6991) or (H) otherwise regulated under the Toxic Substances
Control Act, as amended, 15 U.S.C. ss.2601 et seq., the Clean Air Act, as
amended, 42 U.S.C.ss.7401 et seq., the Hazardous Materials Transportation Act,
as amended, 49 U.S.C.ss.1801 et seq., or the Federal Insecticide, Fungicide and
Rodenticide Act, as amended, 7 U.S.C.ss.136 et seq., the Emergency Planning and
Community Right-to-Know Act, as amended, 42 U.S.C.ss.11001 et seq., the Safe
Drinking Water Act, as amended, 42 U.S.C.ss.300(f) et seq., and the Occupational
Safety and Health Act, as amended, 29 U.S.C.ss.651 et seq.
4.28 Additional Information. Schedule 4.28 contains accurate lists and
summary descriptions of the following as of the date of this Agreement:
(a) the names of all present officers and directors
of Company; and
(b) the names and addresses of every bank and other
financial institution in which Company maintains an account (whether checking,
savings or otherwise), lock box or safe deposit box, and the account numbers and
names of Persons having signing authority or other access thereto;
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4.29 Corporate Records. The minute book of Company (the "Company Minute
Book") is current and contains correct and complete copies of all Charter
Documents of Company, including all amendments thereto and restatements thereof,
and of all minutes of meetings, resolutions and other actions and proceedings of
its stockholders and board of directors and all committees thereof, and the
records of Company are current, correct and complete and reflect the issuance of
all of the securities of Company to the Stockholders.
4.30 Broker's or Finder's Fee. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC,
no agent, broker, person or firm acting on behalf of Company or, to the
knowledge of Company, one or more of the Stockholders is, or will be, entitled
to any commission or broker's or finder's fees from Company in connection with
this Agreement or any of the Transactions.
4.31 Relationship With Customers. Company has used its commercially
reasonable efforts to maintain good working relationships with its customers.
Company's customer Contracts and customer relationships which have been
terminated or cancelled during the past year are set forth and described on
Schedule 4.31. Schedule 4.31 also contains lists of the names of each of the
fifty (50) customers who, in the aggregate for (a) the fiscal year ended in 2001
and (b) for the period ending August 31, 2002, were the largest dollar volume
customers of Company, indicating the dollar amount of sales to each such
customer. As of the date of this Agreement, none of such customers has
terminated or indicated in writing an intention to terminate any Contract with
Company, or all or a material part of the purchases of goods or services from
Company. Company has not received notice of any material complaint by any of
such customers, and Company knows of no reasonable basis for any complaint by
any of such customers likely to result in a Material Adverse Effect.
4.32 Product or Service Liability. There is no action, suit,
proceeding, inquiry or investigation by or before any court or governmental or
other regulatory or administrative agency or commission pending or, to Company's
knowledge, threatened against or involving Company relating to any services
performed by Company and alleged to have been defective or improperly rendered,
or any products or software delivered or sold by Company which are alleged to be
defective or not in compliance with contractual requirements.
4.33 Product and Service Warranties. During Company's 2001 and 2002
fiscal years (provided that, to the extent that this representation applies to
the 2002 fiscal year, it shall only apply to the period from the start of the
2002 fiscal year through the Effective Time), no claims for breach of product or
service warranties or guarantees to customers have been received by Company
which were not, or will not be, fully satisfied by the replacement of the
allegedly defective or damaged products by Company.
4.34 Company Board of Directors Approval and Recommendation; State
Takeover Statutes. The Company Board of Directors, at a meeting duly called and
held, has (i) approved and adopted this Agreement, the Merger and the
Transactions in accordance with the DGCL and Company's Charter Documents, (ii)
determined that this Agreement, the Merger and the Transactions are fair to and
in the best interests of the stockholders of Company, (iii) determined that the
Final Merger Consideration is fair to and in the best interests of the
Stockholders, and (iv) resolved to recommend that the Stockholders approve and
adopt this Agreement (not including the exhibits and schedules hereto) and the
Merger. The Company Board of Directors has approved this Agreement, the Merger
and the Transactions, and such approval is sufficient to render inapplicable to
the Merger and the Transactions the restrictions contained in Section 203 of the
DGCL, to the extent, if any, such restrictions would otherwise be applicable to
the Merger and the Transactions. No other state or federal takeover statute or
similar statute or regulation applies or purports to apply to the Agreement, the
Merger or the Transactions.
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5. Representations and Warranties of SCT. SCT and Acquisition Sub, jointly and
severally, hereby represent and warrant to Company as follows:
5.1 Organization and Standing. Each of SCT and Acquisition Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, having all requisite corporate power and authority to
perform its obligations under this Agreement.
5.2 Authority and Binding Effect. Each of SCT and Acquisition Sub has
full power and authority to execute, deliver and perform this Agreement and the
other Transaction Documents to which it is a party and has taken all actions
necessary to secure all approvals required in connection therewith. The
execution, delivery and performance of this Agreement and the consummation of
the Transactions by SCT and Acquisition Sub has been duly authorized by all
necessary corporation action. This Agreement constitutes the legal, valid and
binding obligation of SCT and Acquisition Sub, enforceable against each in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar Laws affecting the
rights of creditors generally and general equity principles (regardless of
whether enforceability is considered a proceeding at law or in equity).
5.3 Validity of Contemplated Transactions. Neither the execution and
delivery of this Agreement by SCT and Acquisition Sub nor the consummation of
the Transactions will contravene or violate any Law or Court Order which is
applicable to SCT or Acquisition Sub, or the Charter Documents of SCT or
Acquisition Sub, will result in a Default under, or require the consent or
approval of any party to, any Contract to which SCT or Acquisition Sub is a
party or by which either of it is otherwise bound or (iii) require SCT or
Acquisition Sub to obtain any License from any federal, state, local or other
court or governmental agency or body or from any other regulatory authority.
5.4 Broker's or Finder's Fee. No agent, broker, person or firm acting
on behalf of SCT or Acquisition Sub is, or will be, entitled to any commission
or broker's or finder's fees from Company or any of its Stockholders or
Affiliates in connection with this Agreement or any of the Transactions.
5.5 Financing. SCT has sufficient cash, available lines of credit or
other sources of immediately available funds to enable it to complete the
transactions contemplated by this Agreement and to pay all related fees and
expenses pursuant to the Merger.
5.6 Claims. There is no Litigation pending or, to SCT's knowledge,
threatened against SCT or Acquisition Sub that would materially and adversely
affect the ability of SCT or Acquisition Sub to perform its obligations under
this Agreement or otherwise relates to the Merger.
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5.7 HSR. Preliminary Merger Consideration, plus the value of SCT's
Company Common Stock (as determined by SCT consistent with 16 C.F.R.
801-10(c)(3)) held as of the date hereof, is less than $50 Million.
6. Pre-Closing Covenants.
6.1 Access. From the date of this Agreement to the Closing Date,
Company shall give SCT and its counsel, accountants and other representatives
reasonable access to Company's premises , personnel, counsel, accounts and other
representatives of Company during Company's normal business hours and furnish to
SCT and such representatives all such additional documents and information with
respect to the business as SCT may from time to time reasonably request. Company
agrees that no investigation by SCT or its representatives shall affect or limit
the scope of the representations and warranties of Company herein or limit the
liability of Company for any breach of such representations and warranties.
6.2 No Solicitation, Etc. Prior to the Closing:
6.2.1 Company agrees that neither it nor any of its officers,
directors and Representatives shall, and that it shall use its reasonable
commercial efforts to cause its employees and other agents not to (and shall not
authorize any of them to) directly or indirectly, (i) solicit, initiate,
encourage, knowingly facilitate or induce any inquiry with respect to, or the
making, submission or announcement of, any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition of or purchase of all or
substantially all of the assets of, or any material equity interest in, Company
or any other similar transaction or business combination (each, other than the
transactions contemplated hereby, an "Acquisition Proposal"), (ii) participate
in any discussions or negotiations regarding, or furnish to any Person any
nonpublic information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to, any Acquisition Proposal with respect to itself or a
breach of this Agreement, (iii) engage in discussions with any Person with
respect to any Acquisition Proposal with respect to itself, except as to the
existence of the terms contained in this Section 6.2.1, (iv) approve, endorse or
recommend any Acquisition Proposal with respect to itself or (v) enter into any
letter of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal or transaction
contemplated thereby with respect to itself. Company shall cease immediately and
cause to be terminated all contracts, negotiations and communications with third
parties with respect to the foregoing, if any, existing on the date hereof and
shall promptly notify SCT of each such termination. Notwithstanding the
immediately preceding sentence, if an unsolicited Acquisition Proposal, or an
unsolicited written expression of interest that can reasonably be expected to
lead to a Acquisition Proposal, shall be received by the Board of Directors of
Company, then, to the extent the Board of Directors of Company, excluding any
directors affiliated with SCT (the "Independent Board"), believes in good faith
(after consultation with its financial advisor) that such Acquisition Proposal
would, if consummated, result in a transaction materially more favorable to the
Stockholders from a financial point of view than the transaction contemplated by
the Agreement (any such materially more favorable Acquisition Proposal being
referred to in this Agreement as a "Superior Proposal") and the Independent
Board determines in good faith after consultation with outside legal counsel
that it is necessary for the Independent Board to comply with its fiduciary
duties to stockholders under applicable law, (i) Company and its officers,
directors, employees, agents and Representatives may furnish in connection
therewith information and take such other actions as are consistent with the
fiduciary obligations of the Independent Board, (ii) the Independent Board may
consider, negotiate, approve, recommend to the Stockholders or enter into an
agreement in respect of such Superior Proposal and (iii) such actions shall not
be considered a breach of this Section 6.2 or any other provisions of this
Agreement (but will be subject to the provisions of Section 3.3.1(f) hereof).
Company shall cause its Representatives to comply with each of the covenants
contained in this Section 6.2;
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6.2.2 Should the Company receive any proposal, inquiry or
contact about any of the other activities referred to in Section 6.2.1 hereof,
Company shall by the close of the next Business Day give written notice thereof
to SCT and also shall promptly provide SCT with such information regarding such
proposal, inquiry or contact as SCT may request; and
6.2.3 Company shall not accept, approve, recommend to the
Stockholders or enter into any agreement in respect of an Acquisition Proposal
(an "Acquisition Proposal Acceptance") (other than a confidentiality agreement)
on the basis that it would constitute a Superior Proposal unless (i) it has
provided SCT with a copy of the Acquisition Proposal document which the
Independent Board has determined would be a Superior Proposal, and (ii) five
Business Days shall have elapsed from the later of the date SCT received notice
of Company's proposed determination to accept, approve, recommend or enter into
an agreement in respect of such Acquisition Proposal, and the date SCT received
a copy of the Acquisition Proposal. During such five Business Day period,
Company acknowledges that SCT shall have the opportunity, but not the
obligation, to offer to amend the terms of this Agreement. The Independent Board
will review any offer by SCT to amend the terms of this Agreement in good faith
in order to determine, in its discretion in the exercise of its fiduciary
duties, whether SCT's offer upon acceptance by Company would result in the
Acquisition Proposal not being a Superior Proposal. If the Independent Board so
determines, it will enter into an amended agreement with SCT reflecting SCT's
amended proposal. If the Independent Board continues to believe, in good faith
and after consultation with financial advisors and outside counsel, that the
Acquisition Proposal is nonetheless a Superior Proposal, it may reject SCT's
amended proposal.
6.3 Operation of the Business. Except as otherwise expressly permitted
or required by this Agreement or as otherwise consented to in writing by SCT,
which consent will not be unreasonably withheld or delayed, between the date of
this Agreement and the Closing Date, Company agrees that Company will:
6.3.1 conduct Company's business only in the ordinary course;
6.3.2 use its reasonable commercial efforts to preserve intact
the current business organization of Company, keep available the services of the
current officers and employees of Company, and maintain the relations and good
will with suppliers, customers, landlords, creditors, employees, agents, and
others having business relationships with Company;
6.3.3 use its reasonable commercial efforts to obtain in
writing as promptly as possible all Required Consents;
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6.3.4 (a) comply in all material respects with all applicable
Laws, (b) pay the debts of Company when due and use usual and customary
collection practices with respect to its receivables, (c) maintain its corporate
existence in good standing in the jurisdictions of its incorporation and its due
qualification in good standing in all jurisdictions in which it is so qualified
and (d) maintain all of its books and records in the usual, regular and ordinary
manner on a basis consistent with past practices;
6.3.5 not (a) make any change in its Charter Documents or its
authorized, issued or outstanding capital stock, (b) grant any options or other
rights to acquire, whether directly or contingently, any of its capital stock,
(c) declare, set aside or pay any dividend or make any other distribution in
respect of its capital stock or directly or indirectly redeem, retire, purchase
or otherwise reacquire any of its shares of capital stock; or (d) sell, rent,
lease or otherwise dispose of a portion of its tangible Assets, except in the
ordinary course of business;
6.3.6 except in the ordinary course of business, not (a) incur
any indebtedness for money borrowed, (b) make any capital expenditures or
commitments for capital expenditures in excess of Twenty Thousand Dollars
($20,000) in the aggregate, (c) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person, (d) create or suffer to exist any new Liens
(other than Permitted Liens), (e) enter into or amend any employment contract,
increase the rate of compensation payable or to become payable by it to any
officer or any other executive employee or make any general increase in the
compensation or rate of compensation payable or to become payable to hourly
employees or salaried employees, (f) accrue or pay to any of its officers or
employees any bonus, profit-sharing, retirement pay, insurance, death benefit,
fringe benefit or other compensation, except as disclosed in the Schedules
hereto, (g) make any distribution or payment to any Affiliate of Company, or (h)
waive or release any material claim or right of cancellation of any material
debt held by Company;
6.3.7 at its own expense, maintain (a) all of the properties
used in the Company's business in good operating condition and repair, ordinary
wear and tear excepted and (b) all insurance covering Company's business,
employees and Assets in full force and effect until 12:01 A.M. on the first day
following the Closing Date with responsible companies, comparable in amount,
scope and coverage to that in effect on the date hereof;
6.3.8 confer with SCT concerning operational matters of a
material nature;
6.3.9 not (a) make or change any material Tax election; (b)
settle or compromise any material federal, local or foreign income Tax
Liability; (c) enter into any Tax sharing, allocation, compensation or like
arrangement; (d) request any Tax ruling; or (e) change any accounting method or
period;
6.3.10 use its commercially reasonable efforts to obtain the
requisite approval of this Agreement (other than the schedules and exhibits
hereto) and the Merger by the Stockholders;
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6.3.11 not enter, other than in the ordinary course of
business, into any Contract which, had such Contract been entered into prior to
the date hereof, would have had to be disclosed pursuant to Section 4.17 hereof;
6.3.12 not take any action that will have or is reasonably
likely to have a Material Adverse Effect.
6.4 Update of Schedules. Prior to the Closing, Company shall promptly
disclose to SCT in writing (i) the occurrence or non-occurrence of any event,
the occurrence or non-occurrence of which is likely to cause any representation
or warranty of Company contained in this Agreement to be untrue or inaccurate in
any material respect at the Closing such that the conditions set forth in
Section 9.3 would reasonably not be satisfied by the End Date. Such disclosure
shall not limit or affect any of SCT's rights hereunder for or with respect to
any misrepresentation or breach of warranty by Company or Company's failure to
fulfill any covenant, agreement or condition contained in this Agreement.
6.5 Telephone Service and Internet Access. Company agrees to take such
actions prior to the Closing as shall be necessary in order for all telephone
numbers and Internet websites, e-mail addresses and other electronic
communication systems, currently used in connection with the Company's business
to remain in operation for continued use by the Surviving Company following the
Closing.
6.6 Benefit Plans. Between the date hereof and the Closing Date,
Company shall maintain in full force and effect the Plans as they pertain to
Company's employees or former employees and, in connection therewith:
6.6.1 Plan Changes. Except as may be required by law or as may
be necessary to continue the qualified status under Section 401 of the Code,
Company shall not adopt, terminate, amend, extend, or otherwise change any Plans
without the prior written consent of SCT, and Company shall give SCT prior
written notice of Company's intention to take any such action required by law or
necessary to continue the qualified status of any Plans as they pertain to
Company's employees or former employees.
6.6.2 Contributions and Payments. Company shall not make,
cause to be made, or agree to make any contribution, award, or payment under any
Plans as they pertain to Company's employees or former employees, except in the
ordinary course of business or at the time and to the extent required by the
written terms thereof, without the prior written consent of SCT.
6.6.3 Termination of Plans. At the request of SCT, Company
shall take all actions necessary to fully and finally terminate the Plans
effective as of the Closing Date or such other date as shall be specified by
SCT.
6.7 Consents, Further Assurances. Consistent with the terms and
conditions hereof, each party hereto will use its reasonable commercial efforts
to execute and deliver such other documents and take such other actions as
reasonably requested by the other party to fulfill the conditions precedent to
the obligation of the other party to consummate the Merger, or as the other
party hereto may reasonably request in order to carry out this Agreement and the
Transactions. SCT, Acquisition Sub and Company shall use their reasonable
commercial efforts and will cooperate with each other to the extent reasonably
necessary to obtain all consents, approvals and waivers, if any, from third
parties required to consummate the Transactions. SCT will, in its capacity as a
Stockholder, vote in favor to approve this Agreement, the Merger and any
payments subject to stockholder approval described in Section 8, which
stockholder approval shall be given by SCT in the manner and within the
reasonable time restrictions requested by Company (and in any event prior to the
Effective Time).
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7. Post-Closing Covenants.
7.1 Benefit Plans. All employees of Company shall be given credit under
SCT's benefit plans, programs and policies (excluding any equity based programs)
for all employment service prior to the Closing Date, for purposes of
eligibility and vesting. SCT shall arrange for each participant in the Plans to
participate in any similar plans of the SCT on terms no less favorable than
those offered to employees of SCT. SCT shall cause any and all pre-existing
condition limitations, eligibility waiting periods and evidence of insurability
requirements under any group health plans to be waived with respect to all
employees of the Company (and their eligible dependents) and shall provide them
with credit for any co-payments and deductibles prior to the Effective Time for
purposes of satisfying any applicable deductible, out-of-pocket, or similar
requirements under any plans in which they are eligible to participate
immediately following the Effective Time.
7.2 Indemnification.
7.2.1 From and after the Effective Time, for a period of six
(6) years thereafter, SCT will cause the Surviving Corporation to fulfill and
honor in all material respects the obligations of Company (or any predecessor
corporation) pursuant to (i) each indemnification agreement between Company and
its directors or officers in effect immediately prior to the Effective Time (the
"Indemnified Parties") and (ii) any indemnification provision under Company's
certificate of incorporation and bylaws as in effect on the date hereof.
7.2.2 In the event Company or the Surviving Corporation or any
of their respective successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers a material amount of
its properties and assets to any person in a single transaction or a series of
transactions, then, and in each such case, SCT will either guarantee or
otherwise remain liable for the indemnification obligations referred to in this
Section 7.2 or will make or cause to be made proper provision so that the
successors and assigns of Company or the Surviving Corporation, as the case may
be, assume the indemnification obligations described herein for the benefit of
the Indemnified Parties.
7.2.3 The provisions of this Section 7.2 shall survive
consummation of the Merger and are (i) intended to be for the benefit of, and
will be enforceable by, each of the Indemnified Parties and (ii) in addition to,
and not in substitution for, any other rights to indemnification or contribution
that any such Indemnified Party may have by contract or otherwise.
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7.3 Directors' and Officer's Insurance. Company shall purchase between
the date of this Agreement and the Effective Time, and SCT following the
Effective Time shall cause the Surviving Company to maintain, directors' and
officers' liability insurance (which may be in the form of an extension of
Company's existing policy) with respect to Company's officers and directors
prior to the Effective Time with a limit of $3,000,000 for a period of two years
following the Closing Date.
8. Employee Matters. As contemplated by Section 2.2.1 hereof, a portion of the
Preliminary Merger Consideration equal to the Employment-Related Retention
Amount shall be deducted from the Preliminary Merger Consideration in order to
determine the Final Merger Consideration. Six Hundred Thousand Dollars
($600,000) of the Employment-Related Retention Amount (the "Severance Amount")
shall be used by SCT to pay severance obligations of Company and the balance of
the Employment-Related Retention Amount (the "Management Retention Bonus
Amount") shall be used by SCT to pay amounts payable under Company's Management
Retention Bonus Plan, a copy of which is attached hereto as Schedule 8 (the
"Management Retention Bonus Plan"). Prior to the Closing Date, Company shall
provide, to all stockholders of the Company that are entitled to vote, adequate
disclosure, including all material facts, relating to the payment to any Person
determined to be a disqualified individual under Code Section 280G(c) of any
portion of the Severance Amount or the Management Retention Bonus Amount, which
disclosure shall be in form and substance reasonably satisfactory to SCT, and
Company shall use its commercially reasonable efforts to obtain stockholder
approval of each portion of such payment that would cause the Person to have
excess parachute payments under Code ss. 280(G)(b) absent such approval in a
manner that complies with Proposed Treasury Regulation ss. 1.280G-1, Q&A-7. Any
portion of such payment that would otherwise constitute an excess parachute
payment that is not approved in a manner that complies with Proposed Treasury
Regulation ss. 1.280G-1, Q&A-7 shall not be paid and will be forfeited. SCT or
the Surviving Company shall pay, from the Severance Amount and the Management
Retention Bonus Amount, any Employment and Withholding Taxes that it determines
in its sole reasonable discretion are required to be paid, to the appropriate
governmental authorities, with regard to the severance payments discussed in
this Section, and SCT or the Surviving Company shall file or deliver any Tax
Return required to be filed or delivered in respect thereof. SCT, Acquisition
Sub or the Surviving Company shall have no obligation to pay any additional
amounts to, or on behalf of, any person in respect of any Employment and
Withholding Taxes. Following the Effective Time, SCT agrees to, and agrees to
cause the Surviving Company to comply, in all material respects, with the
Management Retention Bonus Plan and Company's severance obligations.
9. Conditions Precedent to Obligations of SCT and Acquisition Sub. All
obligations of SCT and Acquisition Sub to consummate the Transactions are
subject to the satisfaction (or waiver by SCT) prior thereto of each of the
following conditions:
9.1 Required Consents. Company shall have received the Required
Consents in a form acceptable to SCT.
9.2 Ancillary Documents. SCT shall have received from Company executed
copies of the respective Transaction Documents to which Company is a party.
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9.3 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of Company contained in this Agreement shall
have been true, correct and complete when made on the date of this Agreement and
shall be true, correct and complete on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, except, in either case (i) to the extent that the aggregate of all
breaches thereof have not had and would not reasonably be expected to have a
Closing Material Adverse Effect, (ii) to the extent such representations and
warranties are by their express provisions made as of the date of this Agreement
or another specified date; and (iii) for the effect of any activities or
transactions which may have taken place after the date of this Agreement which
are contemplated by this Agreement or the Transaction Documents; all of the
terms, covenants, agreements and conditions of this Agreement to be complied
with, performed or satisfied by Company on or before the Closing Date shall have
been duly complied with, performed or satisfied in all material respects; and
SCT shall have received a certificate dated the Closing Date and signed by the
Chief Executive Officer of Company (acting solely in his capacity as Chief
Executive Officer on behalf of Company, and not in an individual capacity) to
the foregoing effects (the "Company CEO Certificate"). For purposes hereof, a
"Closing Material Adverse Effect" means any change, event or effect that is
materially adverse to the business operations, assets, liabilities, condition
(financial or otherwise) and results of operation of Company, taken as a whole;
provided, however, that changes, events or effects resulting from (A) the
performance by Company of its obligations under this Agreement, or (B) any other
action required or contemplated by this Agreement or (C) the announcement or
pendency of the transactions contemplated by this Agreement, shall not be deemed
by itself or themselves, to constitute a Closing Material Adverse Effect or
taken into account in determining whether a Closing Material Adverse Effect has
occurred.
9.4 Company Secretary's Certificate. SCT shall have received a
certificate dated as of the Closing Date and signed on behalf of Company by its
Secretary (acting solely in his capacity as Secretary on behalf of Company, and
not in an individual capacity) to the effect that (a)(i) the certified copy of
Company's certificate of incorporation, certified by the Secretary of State of
the State of Delaware, attached to such certificate, is true, correct and
complete, and is in effect on and as of the Closing Date, (ii) the by-laws of
Company, attached to such certificate, are true, correct and complete, and are
in effect on and as of the Closing Date and (iii) the resolutions of the Board
of Directors, attached to such certificate, approving the execution and delivery
of this Agreement and the consummation of the Transactions, are true and correct
and complete and are in full force and effect as of the Closing Date and (iv)
the resolutions of the Stockholders, attached to such certificate, approving the
execution and delivery of this Agreement (not including the exhibits and
schedules hereto) and the Merger, are true and correct and complete and are in
full force and effect as of the Closing Date; (b) the officers of Company
executing this Agreement and any of the other Transaction Documents are
incumbent officers of Company and that the specimen signatures on such
certificate or certificates are their genuine signatures; and (c) Company is
presently existing and in good standing in the State of Delaware and in the
State of Utah (the "Company Secretary's Certificate"). A certificate of good
standing for each applicable jurisdiction for clause (c) above certified by the
applicable governmental authority as of a date not more than ten (10) days prior
to the Closing Date shall be attached to the Company Secretary's Certificate as
an exhibit.
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9.5 Company Cash Certificate. SCT shall have received a certificate
dated as of September 30, 2002, and signed on behalf of Company by its Chief
Executive Officer (acting solely in his capacity as Chief Executive Officer on
behalf of Company, and not in an individual capacity) certifying the amount of
cash held by Company as of the Closing Date (the "Company Cash Certificate").
9.6 Material Adverse Changes. Since August 31, 2002, there shall have
been no Closing Material Adverse Effect, and there shall be no conditions
existing or, to Company's knowledge, threatened, which would be reasonably
expected to have a Closing Material Adverse Effect, and SCT shall have received
a certificate signed by the Chief Executive Officer of Company (acting solely in
his capacity as Chief Executive Officer on behalf of Company, and not in an
individual capacity) to the foregoing effects (the "Material Adverse Change
Certificate").
9.7 Legal Matters. No claim, action, suit, arbitration, investigation
or other proceeding shall be pending or shall have been brought against Company
which (a) if decided adversely to Company substantially in accordance with such
governmental authority's demand, might be reasonably expected to have a Closing
Material Adverse Effect, or (b) seeks to restrain or questions the validity or
legality of the Transactions.
9.8 WSGR Legal Opinion. SCT shall have received a legal opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ("WSGR"), counsel to Company, substantially in
the form set forth on Exhibit B attached hereto (the "WSGR Legal Opinion").
9.9 Stockholder Approval. This Agreement (not including the exhibits
and schedules hereto) and the Merger shall have been approved by the required
vote of the Stockholders pursuant to Company's charter documents and the DGCL.
10. Conditions Precedent to Obligations of Company. All obligations of
Company to consummate the Transactions are subject to the satisfaction (or
waiver by Company) prior thereto of each of the following conditions:
10.1 Stockholder Approval. This Agreement (not including the exhibits
and schedules hereto) and the Merger shall have been approved by the required
vote of the Stockholders pursuant to Company's charter documents and the DGCL.
10.2 Ancillary Documents. Company shall have received from SCT,
Acquisition Sub and the Surviving Company executed copies of the respective
Transaction Documents to which SCT, Acquisition Sub and/or the Surviving Company
are parties;
10.3 SCT's Representations and Warranties; Performance of Obligations.
All of the representations and warranties of SCT contained in this Agreement
shall have been true, correct and complete when made on the date of this
Agreement and shall be true, correct and complete on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date, except, in either case: (i) to the extent that the
aggregate of all breaches thereof have not had and would not reasonably be
expected to have a material adverse effect on SCT; (ii) to the extent such
representations and warranties are by their express provisions made as of the
date of this Agreement or another specified date; and (iii) for the effect of
any activities or transactions which may have taken place after the date of this
Agreement which are contemplated by this Agreement or the Transaction Documents;
all of the terms, covenants, agreements and conditions of this Agreement to be
complied with, performed or satisfied by SCT on or before the Closing Date shall
have been duly complied with, performed or satisfied; and Company shall have
received a certificate dated the Closing Date and signed by an appropriate
officer of SCT to the foregoing effects (the "SCT Officer's Certificate");
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10.4 Acquisition Sub's Representations and Warranties; Performance of
Obligations. All of the representations and warranties of Acquisition Sub
contained in this Agreement shall have been true, correct and complete in all
material respects when made on the date of this Agreement and shall be true,
correct and complete in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date; all of the terms, covenants, agreements and conditions of
this Agreement to be complied with, performed or satisfied by Acquisition Sub on
or before the Closing Date shall have been duly complied with, performed or
satisfied; and Company shall have received a certificate dated the Closing Date
and signed by an appropriate officer of Acquisition Sub to the foregoing effects
(the "Acquisition Sub Officer's Certificate");
10.5 SCT Secretary's Certificate. Company shall have received a
certificate dated as of the Closing Date and signed on behalf of SCT by its
Secretary or any Assistant Secretary to the effect that (a)(i) the certified
copy of the certificate of incorporation of SCT, certified by the Secretary of
State of the State of Delaware, attached to such certificate, is true, correct
and complete, and is in effect on and as of the Closing Date, (ii) the by-laws
of SCT, attached to such certificate, are true, correct and complete, and are in
effect on and as of the Closing Date and (iii) the resolutions of the Board of
Directors of SCT, attached to such certificate approving the execution and
delivery of this Agreement and the approval of the Transactions, are true and
correct and complete and are in full force and effect as of the Closing Date;
(b) the officers of SCT executing this Agreement and any of the other
Transaction Documents are incumbent officers of SCT and that the specimen
signatures on such certificate or certificates are their genuine signatures; and
(c) SCT is presently existing and in good standing in the State of Delaware (the
"SCT Secretary's Certificate"). A certificate of good standing issued by the
Secretary of State of the State of Delaware as of a date not more than ten (10)
days prior to the Closing Date shall be attached to the SCT Secretary's
Certificate as an exhibit;
10.6 Acquisition Sub Secretary's Certificate. Company shall have
received a certificate dated as of the Closing Date and signed on behalf of
Acquisition Sub by its Secretary or any Assistant Secretary to the effect that
(a)(i) the certified copy of the certificate of incorporation of Acquisition
Sub, certified by the Secretary of State of the State of Delaware, attached to
such certificate, is true, correct and complete, and is in effect on and as of
the Closing Date, (ii) the bylaws of Acquisition Sub, attached to such
certificate, is true, correct and complete, and is in effect on and as of the
Closing Date and (iii) the resolutions of the board of directors and sole
stockholder of Acquisition Sub, attached to such certificate approving the
execution and delivery of this Agreement and the approval of the Transactions,
are true and correct and complete and are in full force and effect as of the
Closing Date; (b) the officers of Acquisition Sub executing this Agreement and
any of the other Transaction Documents are incumbent officers of Acquisition Sub
and that the specimen signatures on such certificate or certificates are their
genuine signatures; and (c) Acquisition Sub is presently existing and in good
standing in the State of Delaware (the "Acquisition Sub Secretary's
Certificate"). A certificate of good standing issued by the Secretary of State
of the State of Delaware as of a date not more than ten (10) days prior to the
Closing Date shall be attached to the Acquisition Sub Secretary's Certificate as
an exhibit.
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11. Indemnification.
11.1 By the Stockholders. To the extent provided in this Section 11,
from and after the Effective Time, the Stockholders who shall have received, or
shall be entitled to receive, Final Merger Consideration pursuant to Section 2.6
agree, in proportion to their original contributions to the Escrow Amount, to
indemnify, defend and hold SCT, Acquisition Sub and the Surviving Company, and
each of SCT's, Acquisition Sub's and the Surviving Company's successors and
assigns, and each of SCT's, Acquisition Sub's and the Surviving Company's
officers, directors, managers, employees, stockholders, members, agents,
Affiliates and any Person who controls SCT, Acquisition Sub or the Surviving
Company within the meaning of the Securities Act or the Exchange Act (each, an
"Indemnified SCT Party") harmless from and against:
11.1.1 Notwithstanding any due diligence review by any
Indemnified SCT Party or other knowledge by any Indemnified SCT Party, any
liabilities, claims, demands, judgments, losses, costs, damages or expenses
whatsoever (including reasonable attorneys', consultants' and other professional
fees and reasonable disbursements of every kind, nature and description incurred
by such Indemnified SCT Party in connection therewith), net of any benefits or
proceeds of insurance (collectively, "Damages"), that such Indemnified SCT Party
may sustain, suffer or incur and that result from or arise out of:
(a) any inaccuracy of any representation or warranty
of Company in this Agreement, the Transaction Documents, the Company CEO
Certificate or the Company Cash Certificate.
(b) any failure by the Company to perform or comply
with any covenant or agreement applicable to it set forth in this Agreement;
(c) payments made by SCT, Acquisition Sub or the
Surviving Company in respect of Dissenting Shares in excess of the consideration
that otherwise would have been payable in respect of such Shares;
(d) payments made by SCT, Acquisition Sub or the
Surviving Company following the Effective Time in respect of, in the nature of,
or which otherwise constitute Transaction Expenses to the extent such payments
are in excess of the Expense Cap;
(e) any and all Taxes of Company or any Stockholder,
or any of their respective Affiliates (except for SCT and its subsidiaries and
related companies), that accrued or that relate to a period ending on or prior
to the Closing Date, including but not limited to (i) any Taxes imposed on
Company, any Stockholder or any of their respective Affiliates (except for SCT
and its subsidiaries and related companies), as a result of any of the
Transactions, (ii) any Liability of Company or any of its Affiliates (except for
SCT and its subsidiaries and related companies) under any Tax allocation,
sharing indemnification (or similar arrangement, whether or not written, (iii)
any Liability resulting from the termination of Company or any of its Affiliates
(except for SCT and its subsidiaries and related companies) as a member of any
consolidated, affiliated, combined, unitary or other similar Tax group, or (iv)
any Taxes imposed on Company or any of its Affiliates (except for SCT and its
subsidiaries and related companies) under Treasury Regulation Section 1.1502-6
or any analogous state, local or foreign tax provision, as a result of being a
member of a consolidated, affiliated, combined, unitary or other similar Tax
group for any taxable period commencing before the Closing Date (in each case
except for (x) amounts reserved for or otherwise accrued (excluding reserves for
deferred Taxes attributable to book-tax timing differences) on the Interim
Financial Statements of Company or on Company's books and records or (y) matters
listed on the Disclosure Schedule); and
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(f) the matters disclosed on Schedule 11.1.1(f).
11.1.2 any and all actions, suits, claims, proceedings,
investigations, allegations, demands, assessments, audits, fines, judgments,
costs and other expenses (including without limitation reasonable attorneys'
fees and expenses) incident to any of the foregoing or to the enforcement of
this Section 11.1.
11.2 By SCT, Acquisition Sub and the Surviving Company. To the
extent provided in this Section 11, SCT, Acquisition Sub and the Surviving
Company shall, jointly and severally, indemnify, defend and hold the
Stockholders, and each of their heirs, successors and assigns (each, an
"Indemnified Company Party") harmless from and against:
11.2.1 any Damages that such Indemnified Company Party may
sustain, suffer or incur and that result from, arise out of or relate to:
(a) any inaccuracy of any representation or warranty
of SCT or Acquisition Sub contained in this Agreement or any certificate or
other writing delivered by or on behalf of SCT or Acquisition Sub in connection
herewith; and
(b) any nonfulfillment of any covenant or agreement
of SCT, Acquisition Sub or the Surviving Company contained in this Agreement;
and
11.2.2 any and all actions, suits, claims, proceedings,
investigations, allegations, demands, assessments, audits, fines, judgments,
costs and other expenses (including without limitation reasonable attorneys'
fees and expenses) incident to any of the foregoing or to the enforcement of
this Section 11.2.2.
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11.3 Procedure for Claims.
11.3.1 An Indemnified SCT Party or an Indemnified Company
Party that desires to seek indemnification under any part of this Section 11
(each, an "Indemnified Party") shall give notice (a "Claim Notice"), prior to
the Expiration Date, (a) with respect to a claim by an Indemnified SCT Party,
from SCT to the Stockholder's Representative on behalf of the Stockholders (the
"Company Indemnitors") or (b) with respect to a claim by an Indemnified Company
Party, from the Stockholder's Representative to SCT on behalf of SCT,
Acquisition Sub and the Surviving Company (the "SCT Indemnitors") (each of the
Company Indemnitors, on the one hand, and the SCT Indemnitors, on the other
hand, an "Indemnitor") (any party delivering such a Claim Notice, a "Notifying
Party"; and any party receiving such a Claim Notice, a "Receiving Party"). Such
Claim Notice shall briefly explain the nature of the claim and the parties known
to be involved, and shall specify the amount thereof. If the matter to which a
claim relates shall not have been resolved as of the date of the Claim Notice,
the Notifying Party shall estimate the amount of the claim in the Claim Notice,
but also specify therein that the claim has not yet been liquidated (an
"Unliquidated Claim"). If a Notifying Party gives a Claim Notice for an
Unliquidated Claim, the Notifying Party shall also give a second Claim Notice
(the "Liquidated Claim Notice") within 60 days after the matter giving rise to
the claim becomes finally resolved, and the Liquidated Claim Notice shall
specify the amount of the claim. With respect to any Claim Notice, the Receiving
Party shall respond to any Notifying Party that has given a Claim Notice (a
"Claim Response") within 30 days (the "Response Period") after the later of (a)
the date that the Claim Notice is given and (b) if a Claim Notice is first given
with respect to an Unliquidated Claim, the date on which the Liquidated Claim
Notice is given. Any Claim Notice or Claim Response shall be given in accordance
with the notice requirements hereunder, and any Claim Response shall specify
whether or not the Receiving Party giving the Claim Response disputes the claim
described in the Claim Notice. If a Receiving Party fails to give a Claim
Response within the Response Period, such Receiving Party shall be deemed not to
dispute the claim described in the related Claim Notice. If a Receiving Party
elects not to dispute a claim described in a Claim Notice, whether by failing to
give a timely Claim Response or otherwise, then the amount of such claim shall
be conclusively deemed to be an obligation of the Indemnitors represented by
such Receiving Party.
11.3.2 If the SCT Indemnitors shall be obligated to indemnify
an Indemnified Company Party hereunder, the SCT Indemnitors shall pay to such
Indemnified Company Party within 30 days after the last day of the Response
Period the amount to which such Indemnified Company Party shall be entitled. If
there shall be a dispute as to the amount or manner of indemnification under
this Section 11, the Indemnified Company Party may pursue whatever legal
remedies may be available for recovery of the Damages claimed from the SCT
Indemnitors, but any dispute shall be resolved in accordance with Section 13.6
to the extent that it may be applicable. If the SCT Indemnitors fail to pay all
or part of any indemnification obligation when due, then the SCT Indemnitors
shall also be obligated to pay to the applicable Indemnified Party interest on
the unpaid amount for each day during which the obligation remains unpaid at an
annual rate equal to the Prime Rate, and the Prime Rate in effect on the first
Business Day of each calendar quarter shall apply to the amount of the unpaid
obligation during such calendar quarter.
11.3.3 If the Company Indemnitors shall be obligated to
indemnify an Indemnified SCT Party hereunder, the amount to which such
Indemnified SCT Party shall be entitled shall be paid from the Escrow Amount
within 30 days after the last day of the Response Period, in accordance with the
Escrow Agreement.
11.4 Claims Period. Any claim for indemnification under this Section 11
shall be made by giving a Claim Notice under Section 11.3 on or before the
Expiration Date, or the claim under this Section 11.4 shall be invalid. So long
as a Notifying Party gives a Claim Notice for an Unliquidated Claim on or before
the Expiration Date, such Notifying Party shall be entitled to pursue the rights
to indemnification of the Indemnified Parties represented by such Notifying
Party until such time as it gives the related Liquidated Claim Notice.
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11.5 Third Party Claims. An Indemnified Party that desires to seek
indemnification under any part of this Section 11 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give prompt notice (an "Action Notice")
of a third party's institution of such Action (a) with respect to an Action
brought against an Indemnified SCT Party, from SCT to the Stockholder's
Representative on behalf of the Company Indemnitors or (b) with respect to a
claim by an Indemnified Company Party, from the Stockholder's Representative to
SCT on behalf of the SCT Indemnitors (any party delivering such an Action
Notice, an "Indemnified Party Representative"; and any party receiving such an
Action Notice, an "Indemnitor Party Representative") . After such Action Notice,
the Indemnitor Party Representative may participate in such Action or assume the
defense thereof, with counsel satisfactory to the Indemnified Party
Representative; provided, however, that each applicable Indemnified Party shall
have the right to participate at its own expense in the defense of such Action;
and provided, further, that the Indemnitor Party Representative shall not
consent to the entry of any judgment or enter into any settlement, except with
the written consent of the applicable Indemnified Party Representative (which
consent shall not be unreasonably withheld or delayed). If an Indemnitor Party
Representative does not elect to assume the defense of an Action, then (I) the
Indemnified Party Representative shall assume the defense of such Action (with
counsel selected by the Indemnified Party Representative and reasonably
satisfactory to the Indemnitor Party Representative), and (II) each applicable
Indemnitor shall be entitled to participate (at such Indemnitor's expense) in
the defense of such Action; provided, that no Indemnitor will be bound by any
settlement, adjustment or compromise of such Action or of any of the claims made
in connection therewith that is effected without the consent of the Indemnitor
Party Representative (which consent may not be unreasonably withheld or
delayed). Any failure to give prompt notice under this Section 11.5 shall not
bar an Indemnified Party Representative's right to claim indemnification under
this Section 11, except to the extent that an Indemnitor shall have been
materially harmed by such failure.
11.6 Escrow as Sole Remedy. Claims by an Indemnified SCT Party for
Damages shall be made solely against the Escrow Amount, as provided in the
Escrow Agreement. Notwithstanding anything in this Agreement or the Escrow
Agreement to the contrary, the portion of the Escrow Amount comprising the
Stockholder Representative Payment shall be segregated from the remainder of the
Escrow Amount and shall be used solely for the purpose of compensating the
Stockholder Representative pursuant to Section 13.12.
11.7 Survival Period. All of the representations and warranties made by
each party in this Agreement or in any agreement or certificate delivered by any
such party pursuant hereto or in connection with the Transactions shall survive
until December 31, 2003 (the "Expiration Date").
11.8 No Contribution/Indemnification. The Stockholders agree that they
will not seek, nor will they be entitled to, contribution from, or
indemnification by, the Surviving Company, under Company's Charter Documents,
this Agreement, applicable corporate laws or other Laws or otherwise, in respect
of amounts due from the Stockholders to an Indemnified SCT Party under this
Section 11.
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11.9 Characterization of Indemnification Payments. Except as otherwise
required by applicable Law, any indemnification payment made pursuant to this
Section 11 shall be treated, for Tax purposes, as an adjustment to the Final
Merger Consideration.
11.10 Limitation on Indemnity.
(a) Notwithstanding any other provision of this
Section 11, except as set forth below, an Indemnified Party shall not be
entitled to indemnification pursuant to Section 11.1.1(a), 11.1.1(f) or
11.2.1(a) (other than in connection with a breach or breaches of the
representation and warranty set forth in Section 5.5 hereof) (as the case may
be), unless and until the aggregate of all Damages to such Indemnified Party
exceeds Two Hundred Thousand Dollars ($200,000) (the "Deductible Amount") and
then such Indemnified Party shall be entitled to indemnification for all of its
Damages in excess of the Deductible Amount; provided however, that Damages in
respect of a breach or breaches of the representations and/or warranties set
forth in the Cash Certificate shall not be limited by or otherwise subject to
the Deductible Amount. In addition, no Indemnified SCT Party shall be entitled
to indemnification pursuant to Section 11.1.1(a), arising out of a claimed
breach (or breaches) of Section 4.12(b) hereof (insofar as such claim relates to
the collectibility of any particular Account Receivable) unless SCT has first
used its commercially reasonable efforts to collect in full such Account
Receivable.
(b) Notwithstanding anything to the contrary
contained in this Agreement, the maximum aggregate amount of any Stockholder's
indemnification obligation pursuant to this Agreement shall be limited to and in
no event exceed such Stockholder's Pro-Rata Share of the Escrow Amount. The
maximum aggregate amount of SCT's, Acquisition Sub's and the Surviving Company's
indemnification obligation pursuant to this Agreement shall be limited to and in
no event exceed an amount equal to the Escrow Amount (the "Cap").
(c) In addition, notwithstanding anything to the
contrary contained in this Agreement, the indemnification provided by this
Section 11.10 shall be the sole and exclusive remedy available to the Company,
the Stockholders, SCT, Acquisition Sub and the Surviving Company for any claim
related to this Agreement or the transactions contemplated hereby.
12. Public Announcements. SCT and Company shall agree on and publish a press
release upon the execution of the Agreement. Notwithstanding the foregoing, the
parties hereto shall consult with each other before issuing any other press
release or making any public statement with respect to this Agreement and the
Transactions and, except as may be required by applicable Law or any applicable
stock exchange or regulations of the National Association of Securities Dealers,
the parties hereto shall not issue any such press release or make any such
public statement without the consent of the other parties hereto.
13. Miscellaneous.
13.1 Tax Matters.
13.1.1 Notice. Prior to the Closing, Company agrees to
promptly notify SCT in writing upon receipt by Company of notice of any pending
or threatened Tax audits or assessments relating to the income, properties or
operations of Company.
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13.1.2 Tax Sharing Agreements. All Liabilities of Company
pursuant to any Tax sharing, allocation, compensation, indemnification or like
agreements or arrangements shall be satisfied on or prior to the Closing Date.
13.1.3 Allocation of Certain Payments. The parties hereto
agree that, pursuant to Treasury Regulations ss.1.1502-76(b)(1)(ii)(B), to the
extent applicable, the Severance Amount and the Management Retention Bonus
Amount are properly allocable to the portion of the date of the Effective Time
beginning after the Effective Time, and that, accordingly, they shall, and shall
cause their respective Affiliates to, consistently treat such amounts as being
allocable to the beginning of the day after the date of the Effective Time.
13.2 Contents of Agreement. This Agreement, together with the other
Transaction Documents, sets forth the entire understanding of the parties hereto
with respect to the Transactions and supersedes all prior agreements or
understandings among the parties regarding those matters.
13.3 Amendment, Parties in Interest, Assignment, Etc. This Agreement
may be amended, modified or supplemented only by a written instrument duly
executed by each of the parties hereto. If any provision of this Agreement shall
for any reason be held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, legal representatives, successors and permitted assigns
of the parties hereto. No party hereto shall assign this Agreement or any right,
benefit or obligation hereunder, except that Acquisition Sub shall be entitled
to assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to SCT or to any direct or indirect wholly-owned
subsidiary of SCT. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party. The parties hereto shall execute and deliver any and all
documents and take any and all other actions that may be deemed reasonably
necessary by their respective counsel to complete the Transactions.
13.4 Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular and
references to the singular include the plural, (b) references to any gender
include all genders, (c) "or" has the inclusive meaning frequently identified
with the phrase "and/or," (d) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to," (e) references to "hereunder"
or "herein" relate to this Agreement, and (f) references as to whether Company
"knows" or has "knowledge" of a given fact, circumstance or condition shall
include the actual knowledge of any director (not including any director of
Company affiliated with SCT) or executive officer of Company after inquiry of
Company's "Senior Directors" and in-house legal counsel. The Section and other
headings contained in this Agreement are for reference purposes only and shall
not control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section, subsection, Schedule and exhibit references are
to this Agreement unless otherwise specified. Each accounting term used herein
that is not specifically defined herein shall have the meaning given to it under
GAAP.
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13.5 Specific Performance. Notwithstanding any other provision in this
Agreement, any party hereunder shall have the right to right to seek specific
performance or injunctive relief to enforce another party's performance of any
obligations expressly set forth in this Agreement.
13.6 Dispute Resolution.
13.6.1 Good-Faith Negotiations. Except as otherwise set forth
in this Agreement, if after the Closing any dispute arises under this Agreement
with respect to a claim for Damages that is not settled promptly in the ordinary
course of business, the parties shall seek to resolve any such dispute between
them, first, by negotiating promptly with each other in good faith in
face-to-face negotiations. These face-to-face negotiations shall be conducted by
the designated senior management representative of SCT and the Stockholder
Representative. If the parties are unable to resolve such dispute between them
within 20 Business Days (or such period as the parties shall otherwise agree)
through these face-to-face negotiations, then any such dispute shall be resolved
in the manner set forth in this Section 13.6.
13.6.2 Resolution of Disputes. Except as otherwise set forth
in this Agreement, any controversy or claim shall be settled by arbitration
conducted on a confidential basis, under the US Arbitration Act, if applicable,
and the then current Commercial Arbitration Rules of the American Arbitration
Association (the "Association") strictly in accordance with the terms of this
Agreement and the substantive law of the State of Delaware. The arbitration
shall be conducted at the Association's regional office located in the
Philadelphia, Pennsylvania area by three arbitrators, at least one of whom shall
be knowledgeable in the software industry, one of whom shall be an attorney and
one of whom shall be a member of an accounting firm familiar with businesses
engaged in software design, programming and implementation. Judgment upon the
arbitrators' award may be entered and enforced in any court of competent
jurisdiction. Neither party shall institute a proceeding hereunder unless at
least 60 days prior thereto such party shall have given written notice to the
other party of its intent to do so. Neither party shall be precluded hereby from
securing equitable remedies in courts of any jurisdiction, including temporary
restraining orders and preliminary injunctions to protect its rights and
interests, but neither party shall seek any such equitable remedies as a means
to avoid or stay arbitration.
13.7 Expenses. Except as set forth in the immediately following
sentence, SCT and Company shall pay and be responsible for their respective
expenses incidental to the preparation of this Agreement, the carrying out of
the provisions of this Agreement and the consummation of the Transactions. SCT
shall pay and be responsible for the first One Million Two Hundred Fifty
Thousand Dollars ($1,250,000) of Company's expenses incidental to the
preparation of this Agreement, the carrying out of the provisions of this
Agreement and the consummation of the Transactions, including, without
limitation, legal, accounting, financial advisory and consulting fees and
expenses ("Transaction Expenses"); provided that, in no event shall the purchase
of directors' and officers' liability insurance as contemplated in Section 7.3
constitute a Transaction Expense. To the extent that Transaction Expenses exceed
the Expense Cap (i) prior to the Effective Time, the Preliminary Merger
Consideration shall be reduced as set forth in Section 2.2.1, or (ii) following
the Effective Time, SCT shall be entitled to indemnification pursuant to the
provisions of Section 11.1.1(d) hereof. Any Transaction Expenses for which SCT
has received invoices prior to the Effective Time shall be paid by SCT at the
Effective Time.
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13.8 Notices. All notices that are required or permitted hereunder
shall be in writing and shall be sufficient if personally delivered or sent by
mail, facsimile message or by a nationally recognized overnight delivery
courier. Any notices shall be deemed given upon the earlier of the date when
received at, or the third day after the date when sent by registered or
certified mail or the day after the date when sent by overnight delivery courier
to, the address or fax number set forth below, unless such address or fax number
is changed by notice to the other party hereto:
If to SCT or Acquisition Sub: SCT
▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
and with a required copy to: SCT
▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
If to Company: Campus Pipeline, Inc.
▇▇ ▇. ▇▇▇ ▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a required copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esquire
13.9 Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of Delaware without regard to its
provisions concerning conflict of laws of the State of Delaware or any other
jurisdiction.
13.10 Further Assurances.From time to time after the Closing, at the
request of any party but at the expense of the requesting party, each of the
parties, as the case may be, will execute and deliver any such other instruments
of conveyance, assignment and transfer, and take such other action as the other
party may reasonably request in order to consummate or evidence the transactions
contemplated hereby.
13.11 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be binding as of the date
first written above, and all of which shall constitute one and the same
instrument. Each such copy shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
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13.12 Stockholder Representative. 13.12.1By virtue of the approval of
the Merger and this Agreement (not including the exhibits and schedules hereto)
by the requisite vote of the Stockholders, each of the Stockholders shall be
deemed to have agreed to hereby appoint ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ its agent and
attorney-in-fact, as the Stockholder Representative for and on behalf of the
Stockholders (the "Stockholder Representative"), to take all actions necessary
to exercise the rights and fulfill the obligations of the Stockholders hereunder
and under the Escrow Agreement, including, but not limited to, the delivery and
receipt of notices, the resolution of disputes among or involving the
Stockholders, and such other actions as shall be appropriate for the Stockholder
Representative to take on behalf of one or more of the Stockholders. All such
decisions and actions taken by the Stockholder Representative shall be binding
upon the Stockholders, and no Stockholder shall have the right to object,
dissent, protest or otherwise contest the same. Furthermore, SCT and the Escrow
Agent shall be entitled to rely conclusively on such written instructions of the
Stockholder Representative which (i) state such writing is being delivered
pursuant to Section 13.11 of this Agreement, (ii) is executed by the Stockholder
Representative and (iii) is being delivered to SCT or the Escrow Agent on behalf
of one or more of the Stockholders. Moreover, no party hereunder shall have any
cause of action against SCT or the Escrow Agent for any action taken by SCT or
the Escrow Agent in reliance upon such instructions or decisions delivered to
SCT or the Escrow Agent by the Stockholder Representative. Furthermore, the
provisions of this Section 13.11 are independent and severable, shall constitute
an irrevocable power of attorney, coupled with an interest and surviving death,
granted by each Stockholder to the Stockholder Representative and shall be
binding upon the executors, heirs, legal representatives and successors of each
Stockholder. As compensation for serving as Stockholder Representative, the
Stockholder Representative shall receive the Stockholder Representative Payment,
payable in two equal installments, the first being on the business day following
the 9 month anniversary of the Closing Date, and the second being on the
Expiration Date. The Stockholder Representative Payment shall be made from the
Escrow Fund. Lastly, all fees and expenses incurred by the Stockholder
Representative pursuant to this Section 13.11 shall be paid by the Stockholders;
provided, however, that in lieu of receiving direct payment by the Stockholders,
but subject to the prior right of any Indemnified Party to make claims for
Losses, the Stockholder Representative shall have the right to recover from the
Escrow Fund prior to any distribution to the Shareholders, any fees, costs and
expenses, including those of any legal counsel or other professional retained by
the Stockholder Representative, in connection with the performance, acceptance
and administration of the Stockholder Representative's duties hereunder.
13.12.2 Such agency may be changed by the Stockholders from
time to time upon not less than thirty (30) days prior written notice to SCT;
provided, however, that the Stockholder Representative may not be removed unless
holders of a two-thirds interest of the Escrow Fund agree to such removal and to
the identity of the substituted agent. Any vacancy in the position of
Stockholder Representative may be filled by the holders of a majority in
interest of the Escrow Fund. If for any reason there is no Stockholder
Representative at any time, all references herein to the Stockholder
Representative shall be deemed to refer to the Stockholders .No bond shall be
required of the Stockholder Representative, and the Stockholder Representative
shall not receive compensation for its services. Notices or communications to or
from the Stockholder Representative shall constitute notice to or from the
Stockholders.
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13.12.3 The Stockholder Representative shall not be liable for
any act done or omitted hereunder as the Stockholder Representative while acting
in good faith and in the exercise of reasonable judgment. The Stockholders on
whose behalf the Escrow Amount was contributed to the Escrow Fund shall, in
proportion to their original contributions to the Escrow Fund, indemnify the
Stockholder Representative and hold the Stockholder Representative harmless
against any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Stockholder Representative and arising out of or in
connection with the acceptance or administration of the Stockholder
Representative's duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Stockholder Representative.
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IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto as of the day and year first written above.
CAMPUS PIPELINE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Chairman and Chief Executive Officer
SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
CPI ACQUISITION COMPANY, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President
and Treasurer